2009 Job Summit World Recession & How We Cope

Alan Bollard, Governor

Reserve Bank of New Zealand

27 February 2009

THE RESERVE BANK OF NEW ZEALAND

The biggest destruction of global wealth ever?

$3 trillionLost output

$4 trillionHousing

$30 trillionEquity Markets

$2 trillionCredit-related losses

Value loss (est. $US)

THE RESERVE BANK OF NEW ZEALAND

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

97 98 99 00 01 02 03 04 05 06 07 08 09

QPC

Trading partner growth slows

AsianCrisis

TechBubble

Sars FinancialCrisis

THE RESERVE BANK OF NEW ZEALAND

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

97 98 99 00 01 02 03 04 05 06 07 08 09

QPC

Trading partner growth slows

AsianCrisis

TechBubble

Sars FinancialCrisis

THE RESERVE BANK OF NEW ZEALAND

Lower growth world must adjust

Consumption, currencies

Reserves

Savings, exports

Currencies

THE RESERVE BANK OF NEW ZEALAND

New Zealand has strengths…

• Past strong growth, low unemployment

• Flexible product and labour markets

• Floating exchange rate & hedging

• Responsive monetary policy

• Strong government accounts

• Sound banking system

THE RESERVE BANK OF NEW ZEALAND

94

96

98

100

102

104

Dec-07 Dec-08 Dec-09 Dec-10

Japan

Australia

UK

US

GDP

…but we don’t escape unscathed

THE RESERVE BANK OF NEW ZEALAND

94

96

98

100

102

104

Dec-07 Dec-08 Dec-09 Dec-10

Japan

Australia

UK

US

GDP

…but we don’t escape unscathed

New Zealand

THE RESERVE BANK OF NEW ZEALAND

Domestic credit growth

0

5

10

15

20

25

2004 2005 2006 2007 2008 2009

APC

AgricultureBusiness

Household

THE RESERVE BANK OF NEW ZEALAND

Intended Investment & Employment

-50

-40

-30

-20

-10

0

10

20

30

00 01 02 03 04 05 06 07 08

Net %

Investment

Employment

THE RESERVE BANK OF NEW ZEALAND

How we cope

• New Zealand has some strengths but also vulnerabilities

• We will play our role

• Banks must also play a key role

• You will all be affected. We want to hear your ideas….