— Reserve Bank of New Zealand
The housing market remained one of the greatest threats to the New Zealand economy, the RBNZ's May Financial Stability Report revealed on Wednesday. The report, which is used to provide insights in the Reserve Bank of New Zealand's view of economic and inflation growth as well as the overall direction of the economy, showed that the recent sharp rise in mortgage rates could force households to start selling their houses, leading to weak consumer spending and posing potential financial stability risks. Over the past year, housing prices rose about 13%. Apart from the housing market, policymakers identified the dairy sector as another source of financial stability risks. The Bank's outlook for the sector improved markedly over the past 12 months. However, since dairy products are New Zealand's main export goods, the economic importance of the dairy sector is high and, thus, deterioration of dairy production or market sentiment may threaten economic growth. Last week, the New Zealand Treasury released its annual budget for 2017. According to it, the economy is set to grow 3.1% over the next five years.
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