Report headlines are via Reuters

  • New Zealand’s financial system remains well positioned to support the economy
  • house prices remain above sustainable levels despite recent declines
  • rising global interest rates put downward pressure on the prices of assets such as actions & lodging
  • expect to see a slowdown in high DTI lending over the next few months
  • while a gradual adjustment of house prices to a more sustainable level is desirable for the stability of the financial system, a deeper correction remains a possibility
  • if interest rates need to rise more than currently expected to contain inflationary pressures, this could lead to a slowdown in the labor market over time
  • expect the upward trend in capital ratios to continue over the next few years as the remaining elements of the capital review are implemented
  • proceed with the design of a framework to operationalize the DTI restrictions
  • our 2022 stress test program looking at the risk to banks from rising interest rates and falling house prices
  • underlying weaknesses in certain industries may be revealed when targeted budget support is removed
  • intend to finalize the framework for operationalizing DTI restrictions by the end of 2022
  • a slowdown in global growth, increased trade protectionism or new sanctions could amplify trade impacts in New Zealand

NZD/USD loses some tics. There are not many surprises in the report.

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Note “DTI” stands for debt to income and refers to a macroprudential tool in New Zealand.