New Zealand’s economy is continuing to exhibit strong growth particularly in comparison to Australia which has caused the exchange rate to rise to near parity against the Australian dollar for the first time in 42 years. While lower dairy prices are acting as somewhat of a brake on growth the remainder of the economy, particularly residential and commercial building, remains strong driven by ongoing low interest rates and a near record level of immigration driving house prices, particularly in Auckland, even higher than their already elevated levels. This may well result in the Reserve Bank expanding its macro-prudential tools at a time when it is unable to raise interest rates.

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