RBNZ: No real surprises with the financial stability review - TDS

There were no real surprises with the RBNZ’s Financial Stability Review released earlier this morning with Housing and Dairy getting the attention.

Key Quotes

“In housing, the RBNZ has discussed Debt to income ratios as an additional macro prudential measure to cool the growth in house prices. The idea is to have it ready, but there appears no pressing need to implement right now. In Oct, LVRs were bumped up, so RBNZ is possibly assessing the impact of this for now, so still too early. The run up in dairy prices has taken the heat off the risks here, allowing the average dairy farm to return to profitability. High debt levels remain an area of concern, so the RBNZ is implying not out of the woods yet but the positive is that non-performing loans were low given the severity of the downturn. The last factor the RBNZ mentioned was funding risk. Deposit growth has been weakening, while credit growth has accelerated meaning banks could become more reliant on market funding going ahead, most likely from offshore. There are no concerns at the moment, but is a risk the Bank has flagged that could flow onto the housing and dairy markets.”

“ANZ’s Business Activity Outlook and Confidence reads for Nov edged slightly lower. The outcomes are still consistent with strong GDP growth of +3.5%. The survey was taken post the US election and prior to the 14 Nov quake. Activity fell from 38.4 to 37.6 and confidence fell 4 points, from 24.5 to 20.5. Year ahead inflation expectations rose from 1.44% to 1.49%.”