New Zealand central bank warns of financial shifts as population ages

WELLINGTON, July 15 (Xinhua) -- The central bank of New Zealand warned on Tuesday that the country's aging population poses significant challenges for the financial system.

As more New Zealanders retire, shifts in savings, borrowing, and investment patterns are expected, impacting interest rates, asset values, and the demand for financial products, the Reserve Bank of New Zealand (RBNZ) said in a special topic article in its latest Financial Stability Report.

"This in turn will affect interest rates, asset prices and the demand for financial products. The overall impacts may be complex and vary over time," said Kerry Watt, director of RBNZ Financial System Assessment.

National savings are set to rise in the short term, then fall as retirees draw down assets. This trend may lower interest rates, lift asset prices, and reduce demand for housing loans, with older investors favoring safer investments, the article said.

Banks are expected to receive more deposits but face lower demand for mortgages, leading them to diversify into other lending and services. Meanwhile, health insurance demand is set to grow, while life insurance uptake is likely to decline as the population ages, it said.

The RBNZ urges financial institutions to adapt in order to maintain the resilience of the financial system, as an aging population could weaken the impact of monetary policy and strain government budgets through rising healthcare and pension costs. Enditem