PHOTO: Adrian Orr, Governor of the Reserve Bank of New Zealand Photo: RNZ / Claire Eastham-Farrelly
Surging housing and sharemarkets pose some of the biggest risks to economies, according to Reserve Bank governor Adrian Orr.
Speaking at the 2021 New Zealand Economics Forum at Waikato University, Orr said easy money policies from central banks around the world had been a factor in the spike in share prices and the sharp rises in house prices as people made the most from low interest rates.
However, he said the risks to and vulnerabilities of households and investors had increased accordingly.
“[There are] big question marks around global equity prices relative to underlying earnings, and absolutely a question mark over house prices globally and in Aotearoa-New Zealand relative to household earnings… so take that on board,” he told an economics conference.
Orr said the ease with which people could borrow against their properties and the relative return they could get compared to other investments was a “no brainer”, but also a significant risk.
He reaffirmed that the addition of house prices to RBNZ’s policy instructions would not change its primary focus which was maintaining inflation at about 2 percent, and maximising employment.
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