Reserve Bank Governor Adrian Orr has warned savers against putting their money into high-risk investments offering high returns while interest rates on bank deposits are low.
The Reserve Bank last week cut the official cash rate by half a per cent to a record low one per cent. Retail banks responded by lowering both their home loan rates and the interest they pay on savings accounts and term deposits.
Mr Orr has told TVNZ1's Q+A in an interview for tonight's programme he's concerned finance companies are offering high rates.
He says that's why the Reserve Bank is working closely with the Financial Markets Authority and the Commerce Commission, and has reinvigorated the Council of Financial Regulators.
Mr Orr acknowledged that with a low OCR and low returns on term deposits, some people will look to high-risk investments.
But he says they need to think about alternative investments and how to put their capital to work and pointed out saving is investment.
"If you're saving with cash under the pillow you're losing in real terms. If you've got it in a low nominal bank account, well you might break even on inflation," he said.
"So it's time to have proper conversations and not be sold duds around high-risk investments that aren't justified by the returns. So all this talk about us having learnt and being responsible as financial advisors - time to step up," Mr Orr said.
The central bank governor also says he's watching the banks closely to see that the cut in the official cash rate is passed on to lending rates.
* Q+A is on TVNZ1 on Mondays at 9.30pm, and the episode is then available on TVNZ OnDemand and as a podcast in all the usual places.