However it identifies three main risks:
- Soaring house prices – house prices are overvalued on several measures, particularly in Auckland, and individual debt is high relative to income.
- Dairy industry debt – financial stress in the dairy sector could rise markedly if low global milk prices persist beyond the current season.
- Loose global financial conditions – global interest rates remain extremely low and have encouraged investment in riskier assets. The Reserve Bank believes the “current benign [global] market conditions could unwind in a disorderly fashion, affecting the cost and availability of offshore funding for New Zealand banks”.