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NZ FSR: Risks in Auckland housing, dairy and global scene - ANZ

FXStreet (Bali) - Philip Borkin, Senior Economist at ANZ, reviews the latest NZ Financial Stability Report, in which obvious risks with regard to Auckland housing, dairy and the global picture were highlighted.

Key Quotes

"The Financial Stability Report (FSR) is a key accountability document, reporting on matters relating to the soundness and efficiency of the financial system, including any build-up of systemic risk."

"It has become increasingly market relevant given the inter-linkages between the financial system and real economy, and the RBNZ’s desire to broaden its policy toolkit to address offsetting and sectorspecific shocks hitting the economy. This creates a direct interaction between financial stability policy and monetary policy."

"There were few surprises in the latest FSR, with the financial system again noted to be “sound” but with the obvious risks with regard to Auckland housing, dairy and the global scene all noted."

"Interestingly though, the RBNZ has also now acknowledged that it is watching some regional housing markets closely, which suggests to us it would quite quickly re-tighten LVR restrictions if pressures there were to intensify."

"This must also be a consideration when it comes to the question of additional monetary policy easing (we continue to believe the Bank will leave the OCR unchanged in December)."

"In terms of the balance of concern between dairy and housing, the pendulum appears to be swinging from the former (relative to six months ago) back towards the latter."

"The former is not off the radar; there is just more balance between the two and on the face of it this makes OCR reductions much closer calls."

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