RBNZ: New Zealand’s financial system is sound but continues to face risks

RBNZ Financial Stability Report has been released and highlights that New Zealand’s financial system is sound but continues to face risks.

Key headlines (via Reuters):

• Financial markets have remained volatile due to heightened political uncertainty
• Dairy prices have recovered in recent months and the average dairy farm is now expected to return to profitability this season
• Indebtedness in the dairy sector has increased, leaving sector vulnerable to future shocks
• House price inflation in auckland has softened in recent months but it is uncertain whether this will be sustained
• There is a significant risk of further upward pressure on house prices
• Restrictions on high-debt to income lending could be warranted if housing market imbalances were to deteriorate further
• Loan to value ratio restrictions are increasing the resilience of bank balance sheets to a downturn in the housing market