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I greatly respect and appreciate the operational independence of the Reserve Bank.
My comments about infrastructure investment reported in the recent Stuff article of 15 May related not only to my previous role as CEO of the NZ Super Fund, but also to my current role as Governor of the Reserve Bank.
I spoke openly and frankly because that is a desired feature of the role of Reserve Bank Governor.
When I was CEO of the NZ Super Fund, I had meetings with Earthquake Recovery Minister Gerry Brownlee in Auckland and Wellington and with many relevant organisations in Canterbury in an effort to provide investment capital, both before and after the creation of CERA. The meetings were greatly appreciated and I respect the efforts Mr Brownlee made. The NZ Super Fund also seconded a staff member to Canterbury specifically to assist thinking on how large pools of third-party capital could come into play, and made introductions to global investors when needed.
Any lack of investment by the NZ Super Fund was not caused by lack of commitment from either Mr Brownlee or the NZ Super Fund. Rather it was due to no access for third-party capital into the core infrastructure space, for example, ports (air and sea), transport, electricity distribution and so on. These were decisions made by the appropriate authorities at the time.
That challenge is not unique to Christchurch or New Zealand. It is a global financial challenge and one that leads to financial instability at times, especially stressed balance sheets.
The Reserve Bank Act requires us to promote a sound and efficient financial system. The Policy Targets Agreement that I have signed with the Minister of Finance also requires that, along with maintaining low and stable inflation, the Reserve Bank must contribute to maximising sustainable employment.
I have spoken about specific issues recently because increased infrastructure investment opportunities provide sound investment choices, risk diversification for financing goods and services, and improves maximum sustainable employment by relieving capacity constraints.These are all core components of the Reserve Bank’s role and something we often speak about in our Financial Stability Reports.