The Reserve Bank of New Zealand (RBNZ) has identified increasing financial stability risks in its May 2025 financial stability report.
According to the report, increasing global economic uncertainty, geopolitical tensions, and US import tariffs, along with domestic economic challenges, are putting pressure on the country’s financial system.
Global and Domestic Economic Pressures
Rising geopolitical and trade pressures have surfaced in the Reserve Bank of New Zealand’s latest report, which highlights fresh US tariffs as a key factor shaking global economic confidence. “Risks to global economic growth have increased sharply,” the report noted, with warnings of possible consequences for New Zealand.
Interest Rates and Housing Weigh on Local Economy
Economic conditions remained tepid, with the Reserve Bank highlighting persistent headwinds from interest rates, unemployment, and the housing sector. The report also pointed to early signs of relief, noting that lower interest rates were “reducing debt-servicing costs and easing financial stress for borrowers domestically.”
Governor Christian Hawkesby reinforced confidence in the system: “While the global economic environment has become more volatile, our financial institutions are in a strong position to support the economy.”
Central Bank Highlights External Shocks, Internal Strain
Trade disruptions tied to new US tariffs have raised red flags for global economic growth, according to the Reserve Bank of New Zealand. “Risks to global economic growth have increased sharply,” the report stated. The bank pointed to weak demand conditions amid sustained high interest rates, unemployment pressures, and a stagnant property market at the national level.
However, it noted some domestic relief: lower interest rates were “reducing debt-servicing costs and easing financial stress for borrowers domestically.” Governor Christian Hawkesby noted institutional strength: “While the global economic environment has become more volatile, our financial institutions are in a strong position to support the economy.”
RBNZ Focuses on Credit Risk and Capital Resilience
The Reserve Bank of New Zealand has outlined fresh measures to shore up the country’s financial system as global uncertainties continue to weigh on the economic outlook.
Priorities include monitoring credit risk and loan losses, alongside a planned review of capital adequacy settings. “Maintaining financial stability is crucial to ensuring that New Zealanders can safely save, borrow, and manage financial risk,” said Governor Christian Hawkesby.
Conclusion
Global risks are rising sharply, and New Zealand is not immune. The Reserve Bank’s latest report highlights the combined strain of international trade tensions and domestic economic softness, while reaffirming the strength of local banks.