Reserve Bank Bulletin articles published
The Reserve Bank today published two articles in the Reserve Bank Bulletin.
The Bulletin's first article discusses the risks created by high and rapidly rising levels of household debt. It notes that high debt levels increase the sensitivity of households to any negative shock to their income or balance sheet. During periods of financial stress highly indebted households tend to reduce their spending on goods and services by more than their less-indebted peers, which can amplify an economic downturn. The article says that this behaviour helps to explain the subdued nature of economic recoveries in most advanced economies since the 2008-09 crisis.
The Bulletin's second article outlines how commercial property lending has been the key driver of defaults during most financial crises, both internationally and in New Zealand. The article reviews the structure of the New Zealand market and its relationship to financial stability. A key conclusion is that risks involved in commercial property have declined since the global financial crisis, due to a reduction in the amount of leverage involved in new purchases and developments.
More information: Reserve Bank Bulletin.
Angus Barclay, External Communications Adviser
Ph 04 471 3698, 027 337 1102, email@example.com