The new Reserve Bank governor has defended trading banks from allegations of profiteering.
Graeme Wheeler made his first appearance since succeeding Alan Bollard in October, presenting the central bank's twice-yearly financial stability report on Wednesday.
Mr Wheeler said bank profits in New Zealand are either the same or lower than other parts of the world and banks are in better shape than six months ago.
Low interest rates and easier access to credit on overseas markets also helped shore up the banks.
Asked whether more of the benefits of lower funding costs should be passed on in lower mortgage rates Mr Wheeler defended banks, saying the local mortgage market is competitive and bank profits are in line with those in most developed countries.
Farmers 'carrying too much debt'
Graeme Wheeler warned that some dairy farmers continue to carry too much debt and could find themselves in trouble if export prices fall again.
The Reserve Bank says more than a third of dairy farms will have negative cashflow in the 2012/13 season if Fonterra's milk payout remains at $5.65 to $5.75 per kg.
That would increase to about two-thirds if the payout falls to $5.
Some horticulture operations are also under financial pressure.
Fonterra's latest global dairy trade index shows that the average winning price was $US3387.
BNZ economist Doug Steel says reasonable demand combined with a tightening of supply has helped continue the upward trend in prices.
He says demand out of the emerging world is still quite strong, particularly out of China.
Mr Steel says on the supply side the US drought is having an impact on US milk production.
The horticulture sector represents 7% of agricultural bank lending, although lending to that sector has been contracting, mainly due to consolidation in the wine industry.
The sector represents 7% of agricultural bank lending, although lending has been contracting, mainly due to consolidation in the wine industry.