Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Bollard warns against over regulation in response to quakes

Bollard warns against over regulation in response to earthquakes

Oct. 18 (BusinessDesk) - New Zealand needs to avoid a costly regulatory over-reaction to the Christchurch earthquakes, though the central bank will intervene in the foreign exchange market if needed in response to a large earthquake in Wellington, said Reserve Bank governor Alan Bollard in a speech.

It would be inappropriate, all things being equal, for monetary policy to be stimulatory during the reconstruction period, Dr Bollard said in a speech to the Rotary Club of Wellington.

Disaster preparedness was necessary and desirable, but not costless, he said.

Increases in safety standards, such as seismic strengthening, can result in significant costs for an economy that linger long after the risks they aim to address have occurred. They can also create a complicated regulatory environment that may result in significant impediments for activity.

"The challenge here will be to avoid a costly regulatory over-reaction to a one-off event," Bollard said. Consistent with the Policy Targets Agreement, monetary policy does not react to such short-term price changes.

When the bank reduced the official cash rate by 50 basis points following the February earthquake that devastates Christchurch it described this as an insurance measure to avoid a significant and persistent deterioration in activity.

"We were conscious, however, that depending on wider economic conditions, this insurance would need to be removed as rebuilding, and a recovery in activity more generally, drew the economy's resources into production.

Bollard said a seismic assessment of the Reserve Bank's main office in Wellington in September found that the building would withstand an earthquake greater than the Christchurch earthquake.

"But even though our building could be standing after an earthquake, there is a risk that damage to surrounding buildings could make the Wellington office inaccessible," he said.

To ensure that the bank's core functions were maintained after a major earthquake in Wellington the bank had a dozen staff its Auckland office engaged critical roles. The provisions of Reserve Bank Act provide for the delegation of key aspects of the governor's role to the Auckland office manager, with appropriate safeguards.

Bollard said the Reserve Bank spent time explaining the earthquakes in Christchurch in September last year and February this year and "that limited excessive financial market reactions".

"A bad Wellington earthquake with an epicentre in the nation's capital, could engender a more extreme financial market reaction, and it would be the Reserve Bank's role to intervene to ensure an orderly foreign exchange market if that proved necessary.

"If the country's political leadership and key administrative infrastructure were caught up in an earthquake, this could drive a bigger financial reaction, and make government policy responses much harder," he said.

He reiterated that the central bank had a working assumption of a $20 billion cost for the rebuild of Christchurch. This is equal to 10 percent of gross domestic product.

"We recognise that there is considerable uncertainty around these numbers and revisions to this estimate are likely to continue for some time," he said.

Overall, about $150 million of extra cash was sent to Christchurch in the week following the February earthquake, representing about $350 per resident.

"We learned a lot about ATM configuration to ensure operability, and the internet was very useful to provide up to date information on ATM availability.


"Since that time however, monetary policy has had to account for a number of significant developments,” he said. “These include the continuing sovereign debt concerns in Europe and related developments in financial markets. Business confidence appears to have now recovered well nationwide, and to a large extent also in New Zealand. We believe the cuts in the official cash rate assisted this."

Traders are betting Bollard will raise the official cash rate by 35 basis points over the next 12 months, according to the Overnight Index Swap curve.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Sky City : Auckland Convention Centre Cost Jumps By A Fifth

SkyCity Entertainment Group, the casino and hotel operator, is in talks with the government on how to fund the increased cost of as much as $130 million to build an international convention centre in downtown Auckland, with further gambling concessions ruled out. The Auckland-based company has increased its estimate to build the centre to between $470 million and $530 million as the construction boom across the country drives up building costs and design changes add to the bill.
More>>

ALSO:

RMTU: Mediation Between Lyttelton Port And Union Fails

The Rail and Maritime Union (RMTU) has opted to continue its overtime ban indefinitely after mediation with the Lyttelton Port of Christchurch (LPC) failed to progress collective bargaining. More>>

Earlier:

Science Policy: Callaghan, NSC Funding Knocked In Submissions

Callaghan Innovation, which was last year allocated a budget of $566 million over four years to dish out research and development grants, and the National Science Challenges attracted criticism in submissions on the government’s draft national statement of science investment, with science funding largely seen as too fragmented. More>>

ALSO:

Scoop Business: Spark, Voda And Telstra To Lay New Trans-Tasman Cable

Spark New Zealand and Vodafone, New Zealand’s two dominant telecommunications providers, in partnership with Australian provider Telstra, will spend US$70 million building a trans-Tasman submarine cable to bolster broadband traffic between the neighbouring countries and the rest of the world. More>>

ALSO:

More:

Statistics: Current Account Deficit Widens

New Zealand's annual current account deficit was $6.1 billion (2.6 percent of GDP) for the year ended September 2014. This compares with a deficit of $5.8 billion (2.5 percent of GDP) for the year ended June 2014. More>>

ALSO:

Still In The Red: NZ Govt Shunts Out Surplus To 2016

The New Zealand government has pushed out its targeted return to surplus for a year as falling dairy prices and a low inflation environment has kept a lid on its rising tax take, but is still dangling a possible tax cut in 2017, the next election year and promising to try and achieve the surplus pledge on which it campaigned for election in September. More>>

ALSO:

Job Insecurity: Time For Jobs That Count In The Meat Industry

“Meat Workers face it all”, says Graham Cooke, Meat Workers Union National Secretary. “Seasonal work, dangerous jobs, casual and zero hours contracts, and increasing pressure on workers to join non-union individual agreements. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news