The OECD is urging New Zealand to adopt a deposit insurance scheme to limit depositors' losses in the event of a bank failure.

The Reserve Bank Governor Graeme Wheeler said the central bank had intervened in the currency market to take on the high New Zealand dollar in recent months and was prepared to "scale up" its activities if necessary.

The New Zealand dollar surged to its highest in four and a half years against its Australian counterpart as New Zealand's rising interest rates and growth outlook increase the lure of the nation's currency.

Standard & Poor's, the global credit rating agency, has put eight local banks on notice over the rising risk of a housing bubble bursting in New Zealand.

New Zealand housing is already overvalued by about 25 per cent and if it continues to rise may force the Reserve Bank to hike interest rates, according to the IMF.