For decades, New Zealand's economy has been significantly buoyed by its agricultural sector. But with the ominous spectre of climate change looming, the future of this vital industry is anything but certain.
Inside the walls of the Reserve Bank is a team that looks at the financial stability of New Zealand. Not only does it look at the effects of shifting economic conditions it also runs some sensitive analyses on climate change effects on farming. This includes the effects of an increased chance of flood and draughts but also the financial effects of putting some sort of carbon tax or cost onto farming.
The Director of Financial Stability Assessment & Strategy at the Reserve Bank Kerry Watt told REX host Dominic George that new reports suggest the increase in extreme weather patterns will heavily impact the Ag industry.
"We're about to enter a sort of an El Nino weather pattern which, while likely to have sort of different regional variations, overall is likely to bring perhaps more droughts, particularly in areas such as the Northland and the East Coast," he said.
Watt explained how the effects of climate change have begun to echo through the hallways of the banking sector.
"Climate is a significant risk for the agricultural sector and that is, in turn, a significant risk for the balance sheets of financial institutions."
But it's not all doom and gloom. According to Watt, this new reality has ignited a drive within the banking sector to aid their customers in navigating these challenges. The Reserve Bank is currently conducting a comprehensive climate change risk assessment that spans the entire economy and balance sheets of New Zealand's banks.
Watt believes that this crucial probe will provide the necessary data to help banks better understand and manage these risks.
"We're looking to build the capability of both ourselves and banks in managing this risk, so banks will be in a much better position, I guess, to support their farming customers in the future."
It serves as a clarion call for the banking sector to play an integral role in supporting farmers during these turbulent times.
If you still feel uneasy about your economic situation or even just want to talk to someone, Watt encourages anyone to have that conversation with a financial expert.
"Please go and talk to your bank about these issues, because they are getting into an increasingly better position to stand and to work with their customers."
Only time will tell how these efforts will pan out, but for now, the proactive approach offers a glimmer of hope.
Listen to the full chat between Kerry Watt and Dominic George above.
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