savenaca narube : promoting investment in fiji opening address by mr savenaca narube, governor of the reserve bank of fiji, at the opening of westpac ’ s mhcc branch, suva, 20 june 2008. * * * mr. john cashmore, westpac fiji chief manager management and staff distinguished guests introductory comments today marks yet another milestone in westpac ’ s history as they open their 19th banking site. they have certainly come a long way since they opened in fiji as the bank of new south wales on 12th august 1901. i am honored to be part of this milestone this evening. in the last ten months, westpac has opened branches in port denarau ( september 2007 ) and nakasi ( november 2007 ). westpac now has the second largest number of bank branches and agencies in fiji. that is an impressive progress. i congratulate westpac for their commitment to fiji and also for their confidence in fiji ’ s financial system. investment and confidence is a special thing. true, it is hard to build and very quick to fall. and generating your own confidence when the climate is hard is a tough thing to do. but it can also be self fulfilling. it can be contagious. it is always encouraging to see businesses growing. look at this complex. it was completed about six months ago. it is now a modern meeting point in the city. as they say “ business must go on ” whatever is the environment. no one owes us a living. investment must continue. we need that now more than ever before. investment is the locomotive of growth. without it, the economy will lose steam. so i hope that westpac ’ s confidence will rub off on many of us. we are doing what we can at the reserve bank to promote investment. at the end of april we raised the local borrowing limits of non - resident companies in light of the stability in foreign reserves. we listened to what the investors and the commercial banks were telling us. the change was welcomed and well received by lenders and investors. we are now going further still. we have just completed our review of the local borrowing limits of non - resident individuals. we are relaxing their borrowing too and i wish to announce the major changes. firstly, to build a new residence in fiji, non - resident individuals do not have to bring in all their funding from offshore – they can now borrow locally up to 60 percent of the project cost. secondly, we

the case for the defence. why is inflation so high? on the first count – why is inflation so high – the case for the defence has been advanced by a number of my colleagues in recent months and so hopefully will be familiar to many of you. 1 over the past few years, our economy has been hit by a series of large price level shocks – to oil and other commodity prices, to vat, and to the sterling exchange rate – which have raised companies ’ costs and put upward pressure on prices. together these factors can more than account for the strength of inflation. see for example the speeches by bean ( 2011 ), king ( 2011 ), miles ( 2011 ), and posen ( 2011 ). bis central bankers ’ speeches indeed, recent analysis in the bank ’ s inflation report suggests that these factors can account for a rise in the level of consumer prices since the beginning of 2007 of between 8 – 12 %. 2 this dwarfs the extent to which inflation has exceeded the 2 % inflation target over the same period. now, if we really were in a court of law, i fear the judge may be looking down on me at this point with a degree of disdain, suggesting that this sounds like a series of excuses. “ inflation is inflation ”, he or she may say, “ whatever its cause. your job is to keep inflation close to target ”. i ’ ve considerable sympathy for this argument : the high and variable rates of inflation seen in recent years have affected the ability of both households and companies to plan their spending and investment decisions with any degree of certainty. but the remit of the mpc recognises that trying to keep inflation at target in the face of large shocks and disturbances “ may cause undesirable volatility in output. ” 3 i fear that to some this might sound like i ’ m resorting to technical loop - holes to bolster my defence. but that is not the case. this element of the remit has been central to the operation of monetary policy in recent years. the foremost task of monetary policy over the past few years has been to ensure that the financial crisis did not lead to a prolonged depression. to have offset these price level shocks would have meant presiding over an even deeper recession. i ’ m not saying that if i had had perfect foresight, i wouldn ’ t have changed my policy stance at all. but the hurdle for wanting to have had materially tighter policy in the face of the most severe downturn