Banks' lending for horticulture, led by the kiwifruit industry, is growing by 15 per cent a year and will need watching for associated emerging risks, says the Reserve Bank in its latest Financial Stability Report.
The risk was in light of potential labour constraints in the near term due to border restrictions, the six monthly report on the New Zealand economy said.
Banks had a limited appetite for new dairy lending, reflecting concerns around cost compliance with new environmental regulations.
However the report also noted that uncertainty about global economic conditions is adding to limited demand for dairying lending, particularly for farm expansion.
The report said the agriculture sector continued to show relatively less strain from Covid-19 impacts than other business sectors.