(Adds details from Financial Stability Report, background)
WELLINGTON, May 11 (Reuters) - New Zealand's financial system remains resilient but risks to the financial stability outlook have increased in the past six months, the central bank said on Wednesday.
The outlook for the global economy has deteriorated, dairy prices remain low and imbalances in the housing market continue to increase, the Reserve Bank of New Zealand said in its six-monthly financial stability report.
"The Reserve Bank is closely monitoring developments to assess whether further financial policy measures would be appropriate," it said.
The hot housing market has long been a source of concern for the central bank, in particular in the nation's largest city, Auckland.
The latest monthly QV House Price Index showed that nationwide residential property values for April have increased 12.0 percent over the past year and are now 37.1 percent above the previous market peak of late 2007. The Auckland market has increased 16.5 percent year on year and values are 72.5 percent higher than the previous peak of 2007.
The RBNZ has previously tightened lending rules to curb soaring house prices and it said on Wednesday that those measures have reduced the share of risky lending on bank balance sheets.
However, prices in Auckland remain "stretched relative to incomes" and house prices have also begun increasing strongly in a number of regions across New Zealand, it said.
The central bank also underscored that agricultural prices remain weak, adding to the nation's financial stability risks.
New Zealand's dairy sector was until recently the backbone of the economy, representing around 25 percent of exports. But in the past two years, billions have wiped off farmers' collective revenue.
Around 85 percent of farms run at a loss, leaving them fighting to stave off bankruptcy and forced farm sales.
The RBNZ noted that New Zealand farmers continue to operate below break-even levels and it is expecting a third consecutive season of negative cash flow for many.
It said dairy sector borrowing is expected to increase in coming months and "banks will likely face an increase in stressed dairy loans."
