geopolitics, new zealand and the winds of change a speech delivered to the ‘ shaping futures national conference ’ financial services council in auckland on 7 september 2018 by adrian orr, governor 2 the terrace, po box 2498, wellington 6140, new zealand telephone 64 4 472 2029 online at www. rbnz. govt. nz kia orana tatou katoatoa tena koutou katoa welcome all thanks for the opportunity to speak today on such a far reaching topic. it is a pleasure and a privilege, especially in front of such a large and important audience who impact the lives and financial security of so many new zealanders. it is also timely to chat about financial issues given it is ‘ money week ’, the annual awareness week championed by the commission for financial capability. i know many people will be thinking, ‘ what has the reserve bank governor got to say about anything long - term? doesn ’ t the bank just sit and watch for outbreaks of inflation – shifting the official interest rate on a needs - be basis? some will even comment publicly, ‘ how dare the governor speak outside of their 1 to 3 percent inflation mandate! ’ i hope to convince you we have a strong vested interest in, and influence on, the long - term economic wellbeing of new zealand. the long - term issues are critical to our task of maintaining low and stable consumer price inflation, promoting a sound and dynamic financial system, and meeting the currency needs of the public. first, what do i see as the long - term challenges facing the globe? i summarise the key plague on economic society as ‘ short - termism ’. this is the overt focus on the next day, week, or reporting cycle. in contrast, by long - term, i mean anything that ranges from ‘ outcomes ’ over the next few years, through to an ‘ idealised vision ’ that could last inter - generationally. a short - term focus can be driven by the need to survive from day - to - day. however, it is too often driven by the desire to consume at an unsustainable rate. the desire for instant gratification or reward can often leave behind a trail of unintended consequences. some of these consequences may impact on us personally, but we too often assume we won ’ t be the one affected. an often - posted analogy of short - termism is the seasonal over - imbibing at the staff christmas party, and

full ecosystem implications. finally, we are embarking on a te ao maori strategy at the bank to help us with diversity and inclusion in thought, and to ensure we are operating effectively given the growing significance of maori economic activity within new zealand ’ s financial landscape. te putea matua is in good stead for the future, but not without its challenges. these are driven by technology, economic development, global connectedness, and broader government, public, and employee expectations. it is an exciting and challenging time for the team. our current priorities outline the scope of change underway for tane mahuta : our legislation ( our roots ) is under review, with the idea of modernising and refreshing our scope and capabilities, including broader decision making committees. witness our new dual mandate for inflation targeting and contributing to maximising sustainable employment ; the production and movement of our money ( our sap ) is under review, with new storage and distribution models, and the role of digital currency, being considered ; our payment and settlement systems and digital capability ( our trunk ) are being renewed, with a view to ongoing reliability, security from cyber - risks, and a move to the ‘ cloud ’ ; our regulated financial institutions ( the branches grafted on to tane mahuta ) are under review, including our relationship management with them, and our expectations of their business conduct, capital needs, failure management capabilities, and efficiency metrics ; and our people ( the caretakers or kaitiaki ) are being reinvigorated, with a focus on developing a great team, best central bank vision. focusing on the long - term is core business for te putea matua – the reserve bank. the maintenance of low and stable inflation is a necessary condition of sustainable economic growth. we were pioneers in inflation targeting, with the goal decided by society ( 1 - 3 % annual inflation ), and then the bank being operationally independent to do its work. this operational independence is critical – that is what ensures we do not suffer from shorttermism. new zealand, and much of the developed world, has a history of high and rising inflation due to over - weighting near - term demands. we also understand the importance of our financial stability and currency issue roles. we need to prudentially regulate in a manner that is both sound and efficient in all its forms – cost, allocative, and dynamic efficiency. this means we ‘ bridge the principal - agent gap ’. doing so means we can