Academic journal article The Reserve Bank of New Zealand Bulletin

Turbulent Global Markets Continue to Affect NZ

Academic journal article The Reserve Bank of New Zealand Bulletin

Turbulent Global Markets Continue to Affect NZ

Article excerpt

10 November 2011

Risks to New Zealand's economy and financial system have increased in recent months, Reserve Bank Governor Alan Bollard said today, when releasing the Bank's November 2011 Financial Stability Report.

"Despite progress in reshaping regulatory frameworks, financial systems in many countries remain under stress due to an overhang of private and public debt. Markets have been particularly concerned about the sovereign debt situation in Greece, and the potential for contagion to other European countries. This has made access to offshore debt markets more challenging for New Zealand's banks.

"In New Zealand, households and businesses have been containing debt, which has helped to reduce the country's overall external imbalance. However, these efforts have been offset, in part, by rising levels of public debt.

Further, many households and farmers remain highly leveraged, which leaves them vulnerable to a sharp slowdown in global growth."

Deputy Governor Grant Spencer said the New Zealand banking system is better placed to weather the current market turbulence than at the outbreak of the financial crisis in 2008.

"The banks have increased their capital and liquidity buffers over the past few years. …

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