Reserve Bank Governor Graeme Wheeler will this week reveal just how close housing debt has come to matching New Zealand's annual GDP, along with commentary on the risks facing the country's economy.
While Wheeler won't be unveiling an interest rate decision, his statement does have major implications for the economy and - potentially - for house hunters and mortgage holders.
On Wednesday the Bank delivers its twice annual Financial Stability Report. Ensuring financial stability, ie the safety of our banking system, is an important function of the Reserve Bank, which it does separately from monetary policy.
We can expect to hear Wheeler, with Deputy Governor and Head of Financial Stability Grant Spencer, deliver the latest data on New Zealand debt levels.
Our national position in two specific areas is not going to be pretty. Mortgage debt and dairy farm debt are both at levels that have worried the Reserve Bank for a while and it will be keeping a watchful eye on the liabilities of the four big commercial banks.
Broadly the banks have strong balance sheets but New Zealand's private debt levels are high and rising.
As at March the Bank had clocked New Zealand's housing debt at nearly $216 billion, up eight per cent on a year earlier and fast approaching 100 per cent of our annual GDP.
In its November report the Reserve Bank said the risks to the economy had increased. In other words the bigger the debt the more vulnerable we are to an external shock such as a global economic slump. That's what the Reserve Bank team is paid to worry about, not who can afford a home and where.
Based on the recent house price data they will be worried.
With the Bank still under deflationary pressure to weight monetary policy towards interest rate cuts, there is speculation that it may look to use its financial stability mandate to introduce new bank lending restrictions or tighten existing ones.
In its financial stability report preview ASB economists argue it is likely too soon to see the Reserve Bank unveil new macro-prudential regulations this week.
Mortgage debt and dairy farm debt are both at levels that have worried the Reserve Bank for a while and it will be keeping a watchful eye on the liabilities of the four big commercial banks.
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"We judge that the RBNZ won't have enough data to be convinced that the Auckland market needs further action taken against it right now," they write. "But, there is growing risk over the coming months that the RBNZ ups the Auckland investor deposit requirement from 30 per cent."
If that happens we could expect to see new restrictions introduced elsewhere in the country, they say.
Dairy debt is the other significant concern to New Zealand's outlook. Debt levels should be starting to level out as the big banks adjust their portfolios to reflect the dairy downturn but the longer dairy prices stay down the greater the risk of widespread default by dairy farmers.
Reserve Bank stress testing of the five major banks after November's financial stability report found that they face a collective earnings hit of up to $3 billion over the next couple of years.
The good news is that under the worst-case scenario the banks are strong enough to survive. The bad news is that the worse-case scenario would likely see us paying more for mortgages as banks seek to retain earnings.
Expect to hear the Bank talking to both of these ugly economic bugbears this week.
Even if they don't announce new lending restrictions they will likely offer some clues as to their thinking on the problems.
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