graeme wheeler : the outlook for the new zealand economy speech by mr graeme wheeler, governor of the reserve bank of new zealand, to the canterbury employers ’ chamber of commerce, christchurch, 4 february 2015. * * * good morning and thank you for the invitation to meet with you. it ’ s become an annual tradition to begin the new year ’ s speaking engagements with the canterbury employers ’ chamber of commerce. the reserve bank has been speaking regularly at this event for 22 years, and it ’ s my great pleasure to join you again. we have often discussed how the reserve bank is viewing the state of the economy. as we enter 2015 my colleagues have several questions on their mind. what might we expect from the global economy and how could it affect us, what are the prospects for our economy and the main areas of risk, and how might monetary policy unfold in the future? in essence, the new zealand economy is performing well in many respects and the prospects are good for continued steady growth, falling unemployment and low inflation. but the risks and uncertainties around the global economy are becoming more complex, and this presents considerable challenges for new zealand enterprises, including the reserve bank. i will discuss the main issues that we are currently focusing on in the reserve bank – especially in relation to dairy prices, oil prices, house prices, and the exchange rate, and their implications for monetary policy. let me turn first to the global outlook. a more risky and uncertain global economy we expect economic growth in new zealand ’ s trading partners of around 3 ¾ percent this year – a little higher than last year and slightly above the average growth rate over the past 30 years. growth in trading partner economies ( annual percentage change ) source : haver analytics, rbnz estimates. bis central bankers ’ speeches while this might sound like business as usual, it ’ s also a more risky and uncertain environment. why is this? • first, the divergence in growth between countries has become more marked. this has taken place on two levels : the diminishing contribution of the advanced economies to global growth, and the wide disparities in growth within this group of countries. during 1995 – 2007 the advanced contributed around 60 percent of global growth. since 2008, this has reversed with the emerging economies accounting for about 70 percent of global growth. advanced economies are experiencing their weakest recovery in 70 years. the good news is that the us economy finally has momentum and has been expanding at an annualised rate of 4 percent since april

, central banks can also contribute to greening the economy. in principle, all areas of activity within our competence can be adjusted to become greener. at the bank of lithuania, we believe that in order to change the world, we must first change ourselves. sustainability is one of the strategic objectives of the bank of lithuania. our goal is a green bank and sustainability in all areas of our activities, be it public procurement or the financial assets investment portfolio of the bank of lithuania, which we are restructuring to completely meet all the principles for responsible investing. regarding external sustainability, the direction of the bank of lithuania that is pointed towards greening of the financial sector, i would like to mention some priority areas that contribute to attaining our goals. 3 / 5 bis central bankers'speeches first, it is necessary to effectively manage risks related to climate change and elements of sustainability. i mean the environmental, social and governance risks that are usually referred to as the esg. both the physical climate risks of draughts, floods and other similar cataclysms, and the risks related to the period of transition towards a new model of sustainable economy must become an integrated part of the financial stability monitoring efforts. the second objective is integrating the esg risks into the supervision of financial market participants, by identifying climate change - related risks that are relevant to them and by integrating the green aspects into all the stages and actions of supervision. it means that the green criterion will be considered when conducting business model analysis, assessing compliance with the capital and liquidity requirements, stress testing and in other supervision exercises. moreover, one of our priorities is making sure that funding is available, sufficient, and focused on greening the real economy. particular attention must be paid to the small and medium - sized firms, the smes, which are the backbone of our economy. finally, the monetary policy. two months ago, the european central bank concluded its review of the monetary policy strategy. one of the outcomes of the review is a strong commitment of the european central bank to continue integrating climate change aspects into the monetary policy framework. it means that sustainability will be included into monetary policy operations in fields of information disclosure, risk assessment, collateral framework, and asset purchase programs. nevertheless, sustainability is a new field for central banks that poses many challenges. that is why i highly look forward to hearing the remarks by a colleague from the central bank of the netherlands, a member of the governing board, olaf sleijpen, on standardising climate change