- Reserve Bank of New Zealand
Low milk prices and Auckland's soaring housing market remained the key risks to the New Zealand's financial system, while the lower New Zealand Dollar is helping to cushion the nation's economy, the Reserve Bank of New Zealand said. The central bank reported that risks to financial stability increased since May due to build up in Auckland house prices relative to incomes, ongoing weakness in global dairy prices, as well as China's slowdown and its impact on commodity prices. Global dairy prices plunged more than 50% from a peak in early 2014 to mid-2015. Even though prices rebounded around 30% between August and September, they remain well below profitable levels for many New Zealand farmers. Governor Graeme Wheeler has slashed interest rates three times this year as the slump in milk prices curbs economic growth and damps inflation. At the same time he remained concerned that lower borrowing costs could further fuel housing demand in Auckland, where the central bank estimates prices surged almost 27% in the year to September.
The RBNZ on November 1 tightened lending rules for Auckland residential property investors, requiring them to have a deposit of at least 30% for a mortgage. Latest data suggest those measures are starting to curb demand in Auckland.
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