of this is to limit the onshore funding options available, and to limit the onshore financial instruments new zealanders can easily invest in. turning to the stock market, it appears that domestic corporates and new zealand individuals have an ownership stake in publicly listed companies of around 53 percent. the remainder ( 47 percent ) of the stock market is owned mainly by interests from the us, australia, and the uk. this differs slightly from the international investment position, which suggests foreign interests own only around 28 percent of new zealand assets. the lower proportion suggested by the international investment statistics reflects the fact that ownership of non - listed and unincorporated businesses tends to be rather lower than in publicly listed companies. ( australia is the largest inward investor with around 30 percent of total foreign investment. ) this is shown in the figure : due to small scale firms and private equity, the size of the stock market in new zealand is very small, both absolutely and as a proportion of gdp. of course some new zealand firms list singly or jointly on the australian exchange. despite enjoying some good returns, the small size of this exchange limits options for both new zealand firms and new zealand investors. we are currently seeing a phenomenon where considerable private equity is roving the world looking for investment opportunities. close to home, one source of this is the australian pension schemes, which are filling limited investment opportunities onshore and are increasingly looking at markets like new zealand. some of this involves publicly listed new zealand companies, while a less transparent part has been private offshore funds buying private new zealand companies. offshore some of these funds have helped develop more sophisticated segments of capital markets, such as venture capital. but in new zealand the relatively small scale and low risk appetite of institutional funds means that this market has had to rely on a small number of high wealth individuals and has developed much less as a result. this limits high growth, high risk firms ’ access to growth capital, particularly important in a market where home bias is strong due to the inevitable uncertainties in assessing start - up / growth firms. some consequences of our equity short - fall what are the consequences of new zealand ’ s households ’ preference for investment in housing over investment in businesses? at the micro level it appears that small - medium firms have been less able to access new zealandbased specialised capital market instruments, for example, in the area of private equity, and venture capital. it is hard to judge how much of a disadvantage this has been, but if it drives new zealand corporates

the high new zealand dollar exchange rate during the previous economic upswing prompted a search for potential tools to assist monetary policy. now, in light of the broader and significant social and macroeconomic costs arising from financial system distress in the aftermath of the global financial crisis, there is greater will to consider additional tools. for further discussion on macro - prudential instruments see ha and hodgetts ( 2011 ). bis central bankers ’ speeches we believe several instruments may be useful from this perspective and could potentially form a useful part of the bank ’ s macro - prudential toolkit in the future. the instruments we have been considering include credit - based measures and liquidity and capital buffers. we have been analysing these policy options in a new zealand context, undertaking some simulations and other calculations to help establish their likely effectiveness. our expectation is that we would use these tools infrequently. in this regard, the basel committee has suggested that some countries might only use the counter - cyclical capital buffer once every 10 to 20 years when faced with exceptionally strong credit growth. we think this is a useful perspective. related to this we would have a preference for standards that can be set and to work through a cycle where possible, that is act as an automatic stabiliser rather than a discretionary stabiliser. this is an important learning from fiscal policy. while our work is ongoing, we would offer the following preliminary conclusions : credit - based tools a range of credit - based tools has been used by the emerging economies, especially in asia, for many years. they include a wide range of regulated caps, targets and limits. these tools are receiving increased attention by the advanced economies. of these tools, we have looked specifically at loan - to - value restrictions. loan - to - value restrictions loan - to - value restrictions ( or lvrs ) have been used by a number of countries in response to excessive credit growth and overheated housing markets and, on balance, appear to have met with some success. such a tool could be particularly useful in circumstances when funding and credit margins move counter - cyclically, and so reduce the effectiveness of liquidity and capital requirements in braking credit growth during a boom. another advantage would be that an lvr restriction could be imposed and enforced relatively swiftly, given that banks would require longer operational lead times to meet higher liquidity and capital requirements. however, the use of non - price or administrative restrictions is subject to greater long - term enforcement