Preview of the RBNZ Financial Stability Report (FSR) and the NZ government budget

Its a big week coming for NZD traders, with plenty of data and policy releases from New Zealand

• NZD traders heads up for a busy week of data, RBNZ and the government budget this week

ASB on the RBNZ (in brier):

• The RBNZ's Financial Stability Report (FSR) releases are often a platform for changes to the RBNZ's loan-to-value ratio restrictions (LVRs). Despite the soft Auckland housing market, we don't expect any changes to the LVR restrictions to be announced, given the RBNZ last relaxed the restrictions at the start of the year and it also cut the OCR in May.
• Housing and agriculture risks will remain at the forefront of the RBNZ's financial stability watch-list, though we would expect the RBNZ's view is that the risks have continued to reduce.
• The RBNZ's description of the financial system will be of more interest than usual. Given the RBNZ's assessment that locally-incorporated banks need to substantially increase their capital holdings, will the financial system still be viewed as "sound"?

And this via BNZ on the budget (again, in brief):

• likely to have a feel-good factor around the dollars and cents outlook
• Treasury's GDP growth forecasts will surely be curbed of their recent enthusiasm (recalling that December's HYEFU anticipated 3.1% growth for 2019 and 3.0% for 2020). However they will probably still be rosy enough to allow for sustained/increasing operating surpluses, and net debt tending to about 20% of GDP, over the next few years.
• What about the government's move to a net debt target range of 15 to 25% of GDP beyond 2021/22? At one level it's all quite sensible, and so shouldn't bother anybody (including the rating agencies). Point forecasts can often be man-made rods for one's back (witness the selfflagellation over achieving 2% CPI inflation, and occasional exercises in economic forecast "accuracy"). Even 25% net debt would still be very low by international standards.