However, the full impact is still to be seen and some areas of concern are emerging, according to an extract from the upcoming Reserve Bank of New Zealand – Te Pūtea Matua Financial Stability Report.

“Globally core inflation remains high and central banks are expected to keep monetary policy tight for some time,” says Kerry Watt, Director of Financial Stability Assessment and Strategy.

“Despite challenges caused by rising interest rates, there are few signs of widespread debt-servicing stress in advanced economies. Non-performing loan ratios remain below levels seen during the Global Financial Crisis and banks’ capital and liquidity positions have risen markedly in all advanced economies since the GFC.”

New Zealand has many similarities to other advanced economies and compares favourably overall, Mr Watt says.

“That said, we do have some notable differences in New Zealand. We are relatively more exposed to higher interest rates because we tend to have higher household debt levels, and our mortgage fixed-rate periods are relatively short compared to some other countries. We are also more exposed to global agricultural markets,” he says. “But our banks are less exposed to commercial property, our lending standards are relatively tight, and as a country our government debt levels compare well.”

We explore this topic further in an excerpt from our November 2023 Financial Stability Report that we are pre-releasing today. Our full Financial Stability Report will be published on Wednesday, 1 November.