International forces remain major influence on economy

Release date
28 September 2015

The Reserve Bank's Annual Report 2014-15 shows that New Zealand's economy and financial system remain subject to major challenges in the global environment.

Governor Graeme Wheeler said New Zealand's economy has performed better than many advanced economies in recent years.

However, he said that international forces remain a major influence on the economy. These include large declines in commodity prices, especially dairy and oil, low international interest rates, and record net immigration levels. New Zealand's monetary policy framework is flexible and supporting the economy's adjustment to these significant external forces.

Mr Wheeler said the Bank's activities affect New Zealanders' lives in many ways beyond its decision-making on monetary policy.

"The Bank uses macro-prudential instruments to manage the systemic risks that can develop during boom-bust financial cycles. We provide currency to meet the public's cash needs, we set prudential requirements for banks, other financial institutions and insurance companies, and we provide services to allow financial institutions to settle payments between one another."

The report features an historic timeline in honour of the 80th anniversary of the Bank's August 1934 establishment. The 2014-15 year also marked the 25th anniversary of the Reserve Bank Act 1989 and the introduction of inflation targeting.

Features of the 2014-15 financial year included:

  • The Bank ensured monetary policy was consistent with the maintenance of price stability.

  • The Bank conducted research into the causes of low inflation, and into the interaction between monetary policy and macro-prudential policies. This work fed into the Bank's regular Monetary Policy Statements, Financial Stability Reports, speeches and research publications.

  • The Bank conducted stress tests of New Zealand's Australian-owned banks in conjunction with the Australian Prudential Regulation Authority, and reviewed major banks' stress-testing methodologies. It initiated a regulatory stocktake of its prudential regulations for banks, and a separate stocktake of major banks' outsourcing arrangements.

  • In June 2015, the Bank publicly consulted on proposed changes to LVR restrictions in response to increased financial stability risks from housing market developments in Auckland.

  • The Bank began projects to improve its physical and IT security, renew its payments system infrastructure, and enhance its treasury management systems. It also investigated the possible sale of the NZClear securities settlement system.

  • The Bank managed the design and production of the new Series 7 Brighter Money banknotes ahead of the $5 and $10 banknotes' release in October 2015, and the $20, $50 and $100 banknotes' release in April 2016.

  • The Bank negotiated with the Minister of Finance a new five-year Funding Agreement for 2015-2020.

  • Financial results show the Bank spent a net $60.5 million on activities covered by the 2010-2015 Funding Agreement, and made a surplus of $624 million, and paid a $510 million dividend to the Crown – both of which were the second largest in the Bank's history.

This year the Bank's Annual Report is available as a downloadable PDF.

Media contact
Carole van Grondelle, External Communications Adviser
Ph 04 471 3807, mob 0272 555 400, carole.vangrondelle@rbnz.govt.nz