{"id":413915,"date":"2026-05-06T03:47:12","date_gmt":"2026-05-06T03:47:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/413915\/"},"modified":"2026-05-06T03:47:12","modified_gmt":"2026-05-06T03:47:12","slug":"middle-east-conflict-warning-over-kiwis-ability-to-pay-back-debt","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/413915\/","title":{"rendered":"Middle East conflict: Warning over Kiwis’ ability to pay back debt"},"content":{"rendered":"

\"Stack<\/p>\n

\n

Photo: RNZ\n<\/p>\n

Reserve Bank warns of heightened uncertainty due to Iran war
\nEconomic recovery expected to be “somewhat slower”
\nFinancial institutions well-placed to support economy<\/p>\n

Risks to financial stability have increased due to the Middle East conflict, with a bleaker outlook for the economy, potentially making it harder for borrowers to service debt.<\/p>\n

In its half-yearly Financial Stability Report, the Reserve Bank (RBNZ) stressed the country’s financial system remained resilient, and the banking system was well-placed to support customers even if conditions worsened.<\/p>\n

The RBNZ said the longer the Iran war continued, the greater the risks to global financial stability, with New Zealand already feeling “significant economic effects”.<\/p>\n

Governor Anna Breman said high diesel prices were having the biggest effect on the transport and logistics sectors, as well as primary industries, including forestry and fishing.<\/p>\n

“While economic growth had been recovering prior to the conflict, we are now likely to see a somewhat slower recovery, affecting job growth and debt servicing,” Dr Breman said.<\/p>\n

The RBNZ said banks had strong capital and funding buffers, meaning they were not only “well-placed” to help struggling customers<\/a>, but also manage stresses in offshore funding markets.<\/p>\n

It said stress testing results showed banks’ ability to withstand significant economic shocks, including geopolitical events like the Middle East conflict.<\/p>\n

The RBNZ expected the impact on insurers to be limited, noting health insurers have raised premiums and adjusted policies following several years of high claims costs.<\/p>\n

The RBNZ said it was working on a stress test of life and health insurers.<\/p>\n

\"Dr<\/p>\n

\nReserve Bank Governor Anna Breman
\nPhoto: RNZ \/ Samuel Rillstone\n<\/p>\n

Fuel prices close to their highest levels in 50 years<\/p>\n

Unsurprisingly, the RBNZ said higher oil prices will increase costs for firms, including those already facing weak demand.<\/p>\n

“Prices for these important inputs are now close to their highest levels in the past 50 years after adjusting for inflation,” the RBNZ said in its report.<\/p>\n

It warned that in addition to increased costs for firms, higher oil prices will reduce consumers’ spending power.<\/p>\n

“Higher near-term CPI [consumer price index] inflation due to the conflict will reduce real wages,” the RBNZ said.<\/p>\n

“While it seems unlikely at this stage that the impact on real wages will be as large as it was over 2021\/22, even a small decline in spending power could create financial hardship for some households given the existing cost-of-living pressures.”<\/p>\n

Meanwhile, low profitability in recent years meant firms were in a “more vulnerable position”.<\/p>\n

“Business deposits were elevated after the pandemic, given fiscal support and the strong economic recovery,” it said.<\/p>\n

“However, over the past three years, business deposits, particularly for smaller firms, have declined as a share of GDP [gross domestic product].”<\/p>\n

The RBNZ said mortgage arrears have also declined from the recent peak as the economy improved, with non-performing loans at around 0.6 percent of lending.<\/p>\n

However, it said arrears and non-performing loans remain higher than pre-pandemic levels.<\/p>\n

Sign up for Money with Susan Edmunds<\/a>, a weekly newsletter covering all the things that affect how we make, spend and invest money.<\/p>\n","protected":false},"excerpt":{"rendered":"Photo: RNZ Reserve Bank warns of heightened uncertainty due to Iran war Economic recovery expected to be “somewhat…\n","protected":false},"author":2,"featured_media":10250,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[48,138,47,219,111,43,139,69,49,46,44,45],"class_list":["post-413915","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-audio","tag-business","tag-current-affairs","tag-economy","tag-new-zealand","tag-news","tag-newzealand","tag-nz","tag-podcasts","tag-public-radio","tag-radio-new-zealand","tag-rnz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/413915","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=413915"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/413915\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/10250"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=413915"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=413915"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=413915"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}