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Recent developments in New Zealand's financial stability

Michael Gordon, Leslie Hull, Clive Thorp

This article assesses the current state of, and threats to, financial stability in New Zealand. It does this against a backdrop of continued softness in global growth and in corporate credit quality abroad. It concludes that New Zealand's financial sector has remained resilient despite continued global economic weakness, and there do not appear to be any immediate concerns for financial stability locally. Banks are well capitalised, with sound asset quality and strong parent banks, and corporate credit quality remains satisfactory. New Zealand household leverage is high by the standards of many countries, though not by comparison with some of the more advanced economies of the OECD. While household gearing and debt servicing payments have remained stable, highly indebted households are vulnerable to interest rate volatility.