RBNZ makes annual net profit of NZ$144 mln and pays government NZ$210 mln dividend

RBNZ dividend falls 37% to NZ$210 mln; sees 'slow grind ahead for volatile global economy'; 'real risk of sharp slowdown'

The Reserve Bank of New Zealand has released its annual report detailing a net profit of NZ$144 million and a dividend paid to the government of NZ$210 million. It also reiterated the risks of a sharp slowdown in the global economy.

The central bank said it had focused on the resilience of the New Zealand economy and financial system through the year and stayed on top of inflationary pressures.

Governor Alan Bollard said the developed world was struggling to cope with the aftermath of the global financial crisis and the very large accumulation of public and private debt in the last decade.

“It is now clear that we have a slow grind ahead, with surprises and disappointments that we cannot necessarily foresee. The Bank has been seeking to increase the resilience of the financial system, which will help reduce its vulnerability to external shocks," Bollard said.

The bank said the year was marked by market volatility due to unsteady recovery in the US and ongoing sovereign debt crises in Europe, while the Canterbury earthquakes had caused significant disruption, destruction and economic uncertainty. Offsetting this, domestic activity has been stronger than expected, and farm earnings have benefited from strong commodity prices, driven by growth in China, East Asia and Australia, it said.

However, future inflation expectations had risen as tax changes contributed to a hefty rise in headline inflation and a very strong kiwi dollar has offset the inflationary impact to some extent, it said.

“Overall, the Bank will need to monitor the situation carefully especially as there is now a real risk that global economic activity could slow sharply,” Bollard said.

The Bank reported a net profit of NZ$144 million for the year to 30 June 2011, compared with a loss of NZ$111 million the previous year. It  paid a dividend of NZ$210 million to the government. The dividend was down from total dividends paid the previous year of NZ$335 million and over NZ$600 million the year before that.

The bank said it had continued investigating macro-prudential tools that may help bolster financial system resilience and moderate credit cycles, though Bollard said expectations "need to be realistic about what can be achieved."

See more of the RBNZ's release on the annual report below:

Also featured in the Annual Report is the Bank’s work on tighter prudential standards. These include Basel III and the implementation of capital models for housing and agriculture, recently introduced liquidity requirements, and progress on insurance regulation.

“At the same time, we have had to manage our own balance sheet to take into account big moves in the kiwi and fragility in offshore sovereign markets. Our foreign reserves benchmarking project will help us to do this in the coming year.”

The Annual Report notes that, as the New Zealand currency ages and security features mature, work has started on a multi-year banknote upgrade project.

It also recognises the improvement to the Bank’s ability to handle significant Wellington disruptions by using its new Auckland office disaster recovery capability.

“As the current environment demonstrates, we can expect more disruption and fragility ahead, much of it originating from offshore. We cannot predict all of this, but we can plan to be resilient through it.”

(Updated with comparison to previous year)