New Zealanders’ enthusiasm for borrowing But if this desire to invest in New Zealand on the part of foreigners had been the whole story, we might have expected to see interest rates in New Zealand at levels equal to or even below interest rates abroad, and asset prices - share prices in particular - at high levels by world standards as the impact of the abundant overseas capital swamped our small economy and readily met New Zealanders’ demand for funds.
Instead, while New Zealand interest rates have been very much lower in recent years than would have been the case had there been no capital inflow, they have tended to be higher than those in major capital markets, whether measured in nominal terms or in inflation-adjusted terms.