Reserve Bank governor Graeme Wheeler says raising interest rates as a short-term monetary policy response to Auckland's overheated housing market is "pretty negligible".
Wheeler was appearing before Parliament's finance and expenditure committee after the release of the bank's Financial Stability Report. In response to a question from National Party MP Andrew Bayly on the International Monetary Fund's review saying a monetary policy response could be considered to help contain financial stability risks, Wheeler said a rate hike in the short term was not something the central bank saw as feasible.
"The possibility of us raising interest rates at this point to lean against house price pressures in Auckland are probably pretty negligible," Wheeler said. "The last thing we would want to do is drive the exchange rate up for example."
Auckland's housing market has continued to accelerate in the face of regulatory curbs, increasing the risks facing bankers' loan books, the report says.
New Zealand's banks have the wherewithal to cope with their current level of dairy debt if that sector sours further and are holding more capital than the regulatory minimums, while new curbs imposed on lending to residential property investors in Auckland are expected to moderate house price growth in the country's biggest city.
