Radio New Zealand - Te Reo Irirangi o Aotearoa

Banks' borrowing costs highest since 2009

Updated at 8:41 am on 19 August 2011

Fallout from Europe's debt woes is again affecting New Zealand, with a big increase in banks' borrowing costs.

The risk premium banks pay has jumped to its highest level since the tail end of the global financial crisis in early 2009, as markets remain jittery.

A banking partner at PricewaterhouseCoopers, Paul Skillender, says the banks are not borrowing on the markets at the moment so the high costs aren't yet a problem.

But Massey University banking lecturer David Tripe says banks can afford to stay out of the markets only for a couple of months.

He says if the risk premium paid by the banks remains high, it could hinder any attempt by the Reserve Bank to stimulate the economy with lower interest rates in another downturn.

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