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NEWS: RBNZ governor outlines challenges

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This sounds very familiar

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NEW Zealand Reserve Bank governor Graeme Wheeler has reiterated that his two biggest challenges are the over-valued currency and the housing market, as the bank's 2013 annual report shows it made a dividend payment of $NZ175 million ($A156.58 million) in the latest financial year.

"The two most significant challenges facing the bank at present are the overvalued New Zealand dollar and overvalued housing market," Wheeler said in his preamble to the report.

The New Zealand dollar traded at US82.81 cents on Friday, up from US82.52c on Thursday.

The strong kiwi dollar has been undermining local exporters and made imported substitutions cheaper, while keeping a lid on tradable inflation by reducing importers' costs, he said.

At the same time, rapidly increasing house prices, particularly in Auckland and Christchurch, are posing a risk to the country's financial stability if they were to turn around sharply.

Restrictions on low-equity mortgage lending will come into effect next week in an attempt to cool the housing market without the need to raise interest rates.

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