The financial system faces a rockier road ahead because of rising household debt levels and the burgeoning current-account deficit, Reserve Bank Governor Alan Bollard warned today.
Monday, November 21st 2005, 5:38AM
by The Landlord
And an outbreak of human-to-human transmitted birdflu could exert serious pressure on a financial system.
In his half-yearly report on the stability of the financial system, Dr Bollard said there was a risk foreign investors would hike the price of lending to New Zealand and the kiwi dollar could fall sharply.
"We do feel there is more testing time ahead, that's partly a consequence of a rise in household indebtedness, which has risen significantly, and the widening of the current account (deficit) to 8 per cent," Dr Bollard said.
He said the financial system was well placed to weather a slowdown already occurring but it needed prudent risk management by borrowers, lenders and investors.
