RBNZ is watching key risks facing the financial system and the economy - ANZ

Philip Borkin, Senior Economist at ANZ, suggests that the most interesting element of the RBNZ’s Financial Stability Report is its perception of the key risks (and the risk profile) facing the financial system and the economy more generally.

Key Quotes

“These are the things the RBNZ is watching that could shift the discussion of the financial system being “resilient” and “functioning effectively” (language we expect it to use again today) to something less so.”

“In May, the RBNZ felt these risks sat within three broad themes: the global backdrop, dairy sector strains and excessive housing market strength. Those themes will likely be highlighted again today. However, with some global activity indicators now stabilising, dairy prices rising and the housing market cooling, arguably these risks (while certainly not disappearing) have lessened slightly since May, and we wouldn’t be surprised if the RBNZ acknowledges that.”

“Additionally, we will also be interested in any further progress the RBNZ has made on including debt-to-income restrictions in its macro-prudential tool-kit. While the Governor has recently stated that he wouldn’t use these restrictions right now if he had them available given the market has cooled, we are hoping to get a clearer idea on how the discussions with the Treasury and Minister of Finance have gone and what form the restrictions could possibly take.”