"By 2005 New Zealand's normal short-term interest rates were looking high by OECD standards (though not, despite some media confusion, the highest). The difference in yields was attractive to some investors, and that is one of the factors that contributed to the persistently strong New Zealand dollar. (Another key reason, we should not forget, was the strong terms of trade.)
When credit growth is higher, the share of new loans also tends to be higher, so the arrears rate tends to be lower. This is in addition to the effect on the denominator. Another issue is that macroeconomic conditions, which also affect arrears, are constantly evolving.