HiFX Data Update - RBNZ Governor Wheeler Speech

HiFX Data Update - RBNZ Governor Wheeler Speech

The Reserve Bank Governor Graeme Wheeler has just delivered a speech at the Northern Club.

His key points mentioned are:
• In the absence of major unanticipated shocks, prospects look promising for continued robust economic growth in NZ over the next two years
• The greatest risk we face at this stage relates to the inflated global asset prices and the continuing build up in global debt
• Main domestic risks to NZ economy are migration and housing market
• Encouraging that house price inflation down from peak of 21% in 2015 to 1% currently
• Loan-to-value ratios (LVRs) are not expected to be a permanent measure, but their removal would require a degree of confidence that financial stability risks won’t deteriorate again
• There’s a risk of a housing market resurgence if LVRS were removed at this time
• Long-term inflation expectations remain well anchored at the target mid-point of 2%
• Would not use Debt-to-income (DTI's) while housing market continues to moderate
• A lower NZD is needed to increase tradables inflation and help deliver more balanced growth
• Further surge in house prices can’t be ruled out as mortgage rates are low, net migration flows strong
• Lower net migration could reduce employment, demand growth
• Households already heavily exposed risk of rising interest rates, falling house prices
• The build-up of global debt a risk for NZ economy
The NZD moved lower in response to the release of Governor Wheeler’s speech.

Current indicative levels are:

NZD-USD 0.7235 / 0.7260
NZD-AUD 0.9075 / 0.9100
NZD-EUR 0.6040 / 0.6065
NZD-GBP 0.5595 / 0.5620
NZD-JPY 79.45 / 79.70

Below is the RBNZ link to this Governor Wheeler's speech:
https://www.rbnz.govt.nz/research-and-publications/speeches/2017/speech-2017-08-30

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