New Zealand’s economy and financial system remain on a sound footing, despite continuing challenges in the global environment, according to the Reserve Bank’s latest annual report.

The repost showed a pickup in economic activity in most major economies in the financial year 2016-2017, although inflation and wage pressures remained subdued.

“As a small, open economy, developments beyond our shores have a large influence on New Zealand’s economic outcomes,” former Governor Graeme Wheeler said in the report.

Acting Governor Grant Spencer said the bank focused on a lot of policy work on strengthening the financial system against potential shocks.

As a response to the rapid house-price inflation in recent years, the Reserve Bank introduced loan-to-value restrictions on house lending. This includes tighter LVR restrictions on property investors from October 2016, Spencer said.

The New Zealand banking system remains sound and well capitalised; this is supported by improving domestic economic conditions, Spencer said.

“We have revised the outsourcing policy for larger banks, initiated improvements to banks’ quarterly disclosures, and undertaken stress testing,” he said

During the year, the International Monetary Fund undertook a comprehensive review of New Zealand’s financial sector regulatory regime through its financial sector assessment program (FSAP).

“The IMF recognised a number of positive features of New Zealand’s institutional framework and the bank’s policy approach, and we are assessing their recommendations aimed at strengthening the regulatory framework,” Spencer said.


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