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