zealand dollar price of things which could be exported, such as milk and meat, because the prices of goods of this kind are also directly affected by the depreciation of the exchange rate. ) these price rises will not happen instantaneously, particularly where importers and exporters have covered their foreign exchange risk in the forward market. to the extent that that has happened, it will take a little while for the new zealand dollar prices of imports and exports to go up. but go up they certainly will. ( not all of those price increases will reach consumers in full, however, if some of the price increases are absorbed out of the margins of foreign exporters or local importers and distributors. moreover, a decline in the quality of some goods, difficult to measure accurately in the cpi, may also mask effective price rises. ) the effect of these relative price changes - where the prices of imports, import substitutes, and exportable goods and services go up relative to the prices of things which can only be traded within the new zealand economy - will be to increase the income of those of us producing goods and services which are exportable, or which compete with imports, relative to the rest of us. and in that sense the lower exchange rate can be seen as a healthy development. it is the floating exchange rate at work, encouraging the production of goods and services which will reduce our balance of payments deficit and discouraging the consumption of goods and services which are imported or could be exported. to the extent that the low exchange rate persists, and is not negated by higher domestic inflation, this is likely to see stronger growth in exports of goods and services, slower growth in imports of goods and services, and a reduction in new zealand ’ s balance of payments deficit on current account. and happily, unlike many of the countries which saw bank and corporate balance sheets devastated when their exchange rates fell sharply during 1997 - 98, the fall in the new zealand dollar has had only minimal effect on bank and corporate balance sheets here. yes, there are a few companies which wish they had not taken out so much forward cover on their export receipts when the exchange rate was higher. but these contracts represent “ profits foregone ”, not the kind of disasters which wiped out so many banks and corporates in indonesia and thailand when their exchange rates fell. and the reason for this is that, perhaps because new zealand has had a freely floating exchange rate for more than 15 years now, banks and corporates

and have sufficient collateral. to sum up, the balance we achieved with our interventions during the 4 / 6 bis central bankers'speeches greek crisis was fully within our mandate ; it respected the political commitment to the single currency contained in the treaty, but at the same time we implemented that commitment within the limits of our statute. the treaty prohibition of monetary financing has been a key element in preserving the monetary policy nature of omts and the public sector purchase programme ( pspp ). the technical features of omts imply that they would only be considered if warranted from a monetary policy perspective. moreover, the extra exposure to any single country that the eurosystem might acquire as a consequence of omt activation would be secured by the country ’ s strict obligations arising from the european stability mechanism ( esm ) macroeconomic adjustment programme to which the country would have to submit as a precondition. it is worth noting that in june 2015 the european court of justice ruled that, given the strict modalities for activation, omts fall within the scope of the ecb ’ s mandate and include sufficient safeguards to avoid monetary financing. a number of safeguards apply to public sector bond purchases under the pspp too. such purchases have a monetary policy purpose which is different from the one that applies to omts and are specifically aimed at bringing inflation back to our medium - term objective in a situation in which our key interest rates are at levels that can hardly be reduced much further. the modalities are exclusively governed by the primary objective of price stability and are decided in full independence, irrespective of developments in other policy areas. the size and duration of the pspp are calculated to achieve progress towards the ecb ’ s inflation objective. the effectiveness of the tool is rooted in two important features of the financial system. first, government bond yields are the benchmark indicator for pricing a large set of private debt instruments. second, government bond markets are deep and liquid. interventions in these markets can initiate a process of portfolio rebalancing with significant secondary effects on broad financing conditions. several safeguards are in place to minimise potential distortive effects on market functioning and price formation ( such as the issuer limit and the issue share limit of 33 % ). there has been a prominent financial stability dimension in all unconventional measures taken, but the existing institutional framework ensures that monetary policy is the last line of defence with respect to preserving financial stability. the establishment of the european banking union, in