gdp ) - 2. 7 * * - 3. 7 * cpi inflation is a post - 1991 average, reflecting the inflation targeting period. * * rbnz estimate * * * based on filled jobs in the quarterly employment survey source : statistics new zealand, rbnz expansions in small open advanced economies generally come to an end due to one or more factors : global economic growth weakens or slows in major trading partners and affects the terms of trade and export growth. this might be triggered by a sharp rise in oil prices or a financial crisis. a major domestic policy correction is needed to address a deteriorating fiscal or current account deficit. long - term interest rates rise significantly in response to offshore movements triggered by higher inflation expectations, and / or increased risk premia in major economies. alternatively, domestic short - term rates may need to rise sharply to moderate inflation pressures associated with growing supply and demand imbalances. at this stage the bank ’ s policy analysis does not suggest the need to adjust monetary policy in response to fiscal imbalances, external indebtedness or domestic inflationary pressures. in addition, new zealand ’ s financial system remains sound and continues to operate effectively. i ) domestic risks the strength of the expansion will be affected by changes in households ’ desire to save, the scale of net immigration, and shifts in expectations about future inflation. our forecasts do not incorporate any significant change in the household saving rate, but assume a reduced flow of net immigration that remains high by historical standards. measures of long - term inflation expectations continue to be well - anchored at 2 percent. 4 / 11 bis central bankers'speeches the possibility of worsening imbalances in the housing market remains a major risk with continued low interest rates and strong migration, and rising construction cost inflation reflecting increasing resource pressures. there are upside risks in respect of our migration projections. although departures remain low, arrivals have continued to increase with arrivals by migrants on work visas being particularly strong in recent months. new zealand house price indicators ( such as the growth in real house prices, house price - toincome ratios and house price - to - rent ratios ) are very high internationally and historically. at a time of heightened uncertainty, households are particularly vulnerable to a correction in house prices given the large rise in household debt since 1990. household debt is now equivalent to around 165 percent of household disposable income, up from 100 percent in 2000 and 60 percent in 1990. households are also exposed to a normalisation

the number of business failures that usually follow an economic downturn. we helped to 1 / 3 bis - central bankers'speeches set the stage for the rapid economic rebound that has followed the reductions of pandemic - related restrictions in the third quarter last year and in recent months. * * * the economic recovery is strong, but new waves of the pandemic may slow it down. the priority of economic policies is to continue providing support to the economy until the recovery is set to last and uncertainty subsides. however, as the pandemic has been with us for quite some time now, it is important that policy support is targeted at the most affected and vulnerable households and businesses and that it does not hamper structural adjustment, as this could undermine productivity growth, which has slowed markedly in europe over the last 25 years. the main operational challenge is how to distinguish between viable and nonviable businesses. for those that have dismal chances of survival, it is necessary to prepare the ground for the most efficient liquidation process. it is important that capital is freed up and directed to promising activities and that workers who are likely to lose jobs are equipped with the skills for reallocation as soon as possible. the eventual unwinding of the remaining pandemic support measures should be gradual and guided by stable improvement in economic data. in the medium term, fiscal and monetary policy will need to begin rebuilding space to address future shocks. however, planning for necessary structural reforms, to the pension and healthcare system, for example, should start as soon as possible, as their implementation usually takes time. * * * the european banking system remains resilient, as shown by recent stress tests carried out by the eba and the ecb. its solid position reflects, among other things, the cleaning up of balance sheets, recapitalisations, and strengthening of regulatory and supervisory frameworks after the previous financial crisis. the path of strengthening the resilience of the banking system is not yet complete, however. it is therefore necessary to continue towards the completion of the banking union and bank resolution framework, including a common backstop, and with harmonisation of national insolvency laws. as the health and economic situation stabilises, additional attention should be paid to the long - term challenges of many european banks, namely low profitability and the issue of sustainability of bank business models. as the recovery continues, banks will continue to play an important role in financing businesses and households.