News: UPDATE 2-RBNZ's Wheeler calls for lower NZ dlr, says mortgage lending curbs still needed

• RBNZ governor says lower needed in speech
• Kiwi falls 0.3 pct, but makes back losses
• Risk of house price resurgence if LVRs removed - governor

(Adds details on lending restrictions)

WELLINGTON, Aug 30 (Reuters) - Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler said on Wednesday that a lower New Zealand dollar was needed to help bolster the export sector and push up inflation, triggering a brief selloff in the local currency.

Wheeler also said there was a risk the housing market would take off again if the central bank removed its loan-to-value lending restrictions (LVRs), amid political pressure to rethink their use.

"Their removal would require a degree of confidence that financial stability risks won’t deteriorate again," Wheeler said in a speech reflecting on this five-year term as governor before he steps down on Sept. 26.

Prime Minister Bill English said this month that he had highlighted with the central bank that the rules were temporary and that the RBNZ should set out its criteria for removing them.

The country's previously red-hot housing market has cooled in recent months with home sales plummeting by almost a quarter in the year to July.

The New Zealand currency fell to $0.7241 from$0.7263, after the bank released the speech on its website, but recouped its losses during the afternoon.

"He reiterated that a lower New Zealand dollar is needed, that was enough to spook the market," said Doug Steel, senior economist at BNZ.

Policymakers have long grappled with strong demand for the New Zealand dollar, often driven by its yield appeal, with the main concern being that rapid rises could hurt exporters' margins and temper import-driven inflation.

"The appreciation in the exchange rate has been a headwind for the tradables sector and, by reducing already weak tradables inflation, made it more difficult to reach the Bank's inflation goals," Wheeler said.

Shipments have picked up pace over the past few months, thanks to a rebound in the price of dairy - New Zealand's main export earner. However, as the economy has slowed in the last quarter, policy makers have been keen to temper the currency's strength lest it undermines the trade sector.

The RBNZ is also concerned about keeping inflation moving towards the top-end of its medium term target of 1-3 percent. Annual inflation is currently running at 1.7 percent.

"A lower New Zealand dollar is needed to increase tradables inflation and help deliver more balanced growth," Wheeler said.

The kiwi is poised for its worst monthly fall since January 2016, fuelled in part by the central bank's ramped-up rhetoric over recent weeks for a lower currency.

Investors have also sold the kiwi on speculation that the central bank could intervene in the market, though many traders have said it is nowhere near close to that step.