New Zealanders’ low investment in local businesses leaves the economy more vulnerable to shocks and limits the country’s growth prospects, Reserve Bank Governor Alan Bollard said today.

Dr Bollard said New Zealand investors’ preoccupation with housing assets has been at the expense of other assets such as stocks and shares.

New Zealanders have spent heavily on investment property - houses and apartments beyond their own homes - driven by expectations of exciting capital gains rather than rental yields.

The average New Zealand household’s debt has risen from around 100 percent of disposable income to around 170 percent over the last five years, imposing a heavier mortgage-servicing burden.

“The typical household now commits about 13 percent of its disposable income to service debt. This makes these households much more vulnerable than they used to be to adverse events, such as increases in unemployment and rising interest rates. These debt servicing rates are significantly higher than in other OECD countries.”