The Reserve Bank of New Zealand 's Financial Stability Report for May 2017

Main points, bolding for further emphasis/summary:

  • New Zealand's financial system remains sound
  • Risks facing the system have reduced in the past six months
  • Outlook for the global economy has been improving
  • Global political and policy uncertainty remains elevated
  • Debt burdens are high in a number of countries
  • A sharp reversal in risk sentiment could lead to higher funding costs for New Zealand banks and an increase in domestic borrowing costs
  • New Zealand's banks are vulnerable to these risks because of their increasing reliance on offshore funding for credit growth
  • House price growth has slowed in the past eight months, in response to tighter loan-to-value ratio (LVR) restrictions, and a more general tightening in credit and affordability pressures in parts of the country
  • House prices remain elevated relative to incomes and rents, and any resurgence would be of concern
  • Dairy prices have recovered significantly in the past 12 months, and the majority of dairy farms are likely to have returned to profitability in the 2016/17 season
  • However, parts of the dairy sector are carrying excessive debt burdens, and remain vulnerable to a fall in income or an increase in costs
  • Banking system maintains strong capital and funding buffers, and profitability remains robust
  • Banks have generally tightened credit conditions in light of funding constraints and the increasing risks around housing
  • Banks are seeking to reduce their reliance on offshore funding and have raised deposit rates
  • While the LVR restrictions have increased the banks' resilience to any fall in house prices, a significant share of housing loans are being made at high debt-to-income (DTI) ratios. Such borrowers tend to be more vulnerable to any increase in interest rates or declines in income

Full text is here: Financial Stability Report for May 2017

The RBNZ have highlighted the risks but seem comfortable to be in a monitoring phase right now. It would appear monetary policy to remain on hold for a while yet.

Still to come from the Reserve Bank of New Zealand:

2300GMT -RBNZ governor Wheeler will conduct a press conference (11am local time)

0110GMT -Wheeler appears before a parliamentary committee

The NZD is off a few tics: