earlier. however, we have been, and will continue to work closely with apra. we continuously update one another on our prudential regulations, we maintain a strong working relationship, and we also respect each other ’ s objectives as regulators aiming to protect our respective financial systems. conclusion with new zealand ’ s macroeconomic policy framework and strong financial sector soundness, investors can have long - term confidence in new zealand as an investor destination. the prospects of sustainable and productive growth are enhanced through predictable macroeconomic policy settings and avoidance of financial crises. economic and other shocks have constrained new zealand ’ s economic performance historically. although our macroeconomic stability has improved in recent decades, we remain vulnerable to external and domestic disturbances. overall debt levels remain high while the concentration and persistence of high - leverage within segments of the household and agricultural sectors questions the quality of banks ’ lending standards. the more enduring that low interest rates are, and the more successful they are in promoting borrowing and investment, the more they are likely to pose challenges to the reserve bank ’ s financial stability objectives. the reserve bank has a number of tools it applies to manage financial stability risks, and its lvr policies have a role in limiting the risks that could arise from increasing leverage through inadequate lending standards. more capital is a key part of building new zealand ’ s economic resilience for when severe shocks do occur. we are in the process of weighing up the costs and benefits of how much more and the type of capital that is appropriate for the desired level of resilience, and the timeframe to achieve it. decisions on the capital review are expected to be released in the first week of december.

supporting sustainable economic growth through financial stability policy speech delivered to citi australia and new zealand investment conference on 16 october 2019, in sydney by geoff bascand, deputy governor and general manager of financial stability good morning everyone, my thanks to citi for the invitation for me to come here today and speak with you all - it ’ s a pleasure to be here. today i ’ m going to start by setting the scene to give you an understanding of where the reserve bank of new zealand is currently at in achieving both price and financial stability, and i ’ m also going to outline the risks that new zealand is exposed to in a local and global environment. setting the scene the reserve bank of new zealand ’ s purpose is to promote the prosperity and wellbeing of new zealanders, and contribute to a sustainable and productive economy. for this speech i want to mostly focus on how we promote sustainability by delivering on our objectives : price stability, maximum sustainable employment, and financial stability, and the tools we apply to help keep the economy productive. over the past thirty years, we have seen economic volatility decline following the introduction of inflation targeting, with prices becoming more stable and remaining at relatively lower levels ( figure 1 ). figure 1 : the decline in inflation volatility during the inflation targeting era in new zealand source : stats nz, rbnz calculations. over this same period we have also seen improvements in economic growth, as well as less volatility in this growth ( figure 2 ). figure 2 : quarterly real gdp growth before and during the inflation targeting era source : stats nz, rbnz calculations. with monetary policy maintaining price stability and supporting maximum sustainable employment, other policies we have are aimed at maintaining financial stability. what we mean by ‘ financial stability ’ is having a financial system that can withstand severe, yet plausible, shocks and avoid financial crises. these crises can destabilise economic activity and severely impact business and household income. indeed, evidence from a wide range of countries over many decades shows us that when crises do happen, they are immensely damaging and can have long - lasting effects. 1 usually our price stability and financial stability policies are complementary. however, the low interest rate world we live in complicates achieving both of our objectives, encouraging a build - up of leverage in the financial system. the persistent decline in long - term and shortterm interest rates has supported very high levels of private sector leverage. see the discussion of economic and social costs in bascan