Financial System Stronger despite Global Stresses
7 November 2012
New Zealand's financial system has strengthened, despite a challenging international environment, Reserve Bank Governor Graeme Wheeler said today, when releasing the Bank's November 2012 Financial Stability Report.
"Global economic activity is weak and this is affecting emerging markets, including China. The euro area is fragile given the structural issues facing the region and global growth could be further undermined by the possibility of substantially tighter fiscal policy in the United States," Mr Wheeler said.
Nonetheless, financial market sentiment has improved over recent months reflecting further monetary easing in the major economies and various measures to support the financially distressed euro area members. This has helped New Zealand banks access global funding markets, but has also contributed to the strength of the New Zealand dollar.
"Households and Arms have generally continued to reduce their reliance on debt. However, household debt remains at relatively high levels, with many borrowers still vulnerable, especially to any correction in house prices. …