If too extreme, the strain of these adjustments could undermine the proper functioning of the financial system, which would worsen the economic disruption. I should say at this point that, as far as we can tell, the system remains well placed to weather most plausible scenarios. Asset quality, capitalisation, risk management capacity and the state of parent banks are all strong.
New Zealand is comfortably servicing its external debt, supported by a healthy economic growth rate and a robust capacity to earn foreign exchange. Hedges are in place to reduce the impact of exchange rate movements on New Zealand's external obligations.