The economy has received a good report card from the International Monetary Fund (IMF), although it is still at risk from a hot housing market and global downturn.
Photo: RNZ / Cole Eastham-Farrelly
The IMF's final report on New Zealand's performance has confirmed its initial upbeat view given in March.
It said strong economic growth was being driven by immigration, construction, a recovery in commodity prices and low interest rates.
But it warned record immigration might cause the economy to overheat, and that might reignite the housing market.
"Downside risks stemming from a booming housing market, as well as the potential for tighter external financial conditions, lower demand from trading partners, or disruptions to international trade have increased vulnerabilities," the IMF said in a statement.
The IMF said the Reserve Bank should be allowed to use debt-to-income limits to cool the housing market if needed, along with tax changes to deter property speculation.
"Such measures could help redirect savings to other, potentially more productive, investments and, thereby, support deeper capital markets."
In a separate report, the IMF said New Zealand's banking system was also in good health and capable of withstanding any severe global financial crisis.
However, it recommended the system would be strengthened by bringing in bank deposit insurance and beefed up supervision of financial markets and companies.
Minister of Finance Steven Joyce said the reports backed the government's management, and recognised the benefits of immigration.
"The report is positive about the country's economic outlook and endorses New Zealand's macro-economic and fiscal policy settings."