Deputy governor Geoff Bascand told the Otago Daily Times yesterday Auckland's house price rises - up almost 17% in the year to March, fuelled by migration and investors - have started to distinguish the region from the rest of the country.
''They are going up from what's already a very, very high level,'' he said after a Queenstown Chamber of Commerce function yesterday.
''So we are carefully considering whether action is appropriate,'' Mr Bascand said.
Asked if action would target particular regions, he said the bank was working through that.
He added: ''Previously we've indicated we think that's quite difficult - but perhaps there may be new ways of it getting a little bit more possible.
''We're reconsidering that - it's a time of close scrutiny.''
Pressed for further details he said the bank would make more comment at next Wednesday's financial stability report.
Mr Bascand's comments follow a strong line taken by fellow deputy governor Grant Spencer, who said in a speech last month housing market imbalances ''are presenting an increasing risk to financial and economic stability''.
Mr Bascand yesterday said: ''It is more a regional issue now than it was two years ago - house price movements then were a bit more widespread.
''There are pockets like Queenstown that are still growing quite strongly but not large areas outside Auckland.
''Obviously, what we worry about is the risk that the financial institutions are taking on from higher-risk lending and they're getting increasingly exposed to Auckland, and so that becomes more of a concern to us.''
About half of new mortgages in the country are being borrowed in Auckland - and about 40% of that is taken by investors.
Lending to investors is considered more risky.
A change in Reserve Bank tone led ASB Bank economists to predict there was a 60% probability of OCR rate cuts this year, perhaps 25 basis points each in September and October, on concerns over low inflation.
Reserve Bank governor Graeme Wheeler held the official cash rate at 3.5% late last month.
Although the bank is predicting continued economic growth of about 3% to 3.5%, it is worried about plummeting dairy prices.
Fonterra's forecast farmgate milk price payout for 2014-5 has been slashed from $4.70 per kilogram of milk solids to $4.50 - knocking billions of dollars off the economy. Last year's payout was a record $8.40 and forecasts for this season started a year ago at $7.
Most farmers break even at $5.40.
Whole milk powder prices have dropped from $US5000 a metric tonne in February last year to $US2386 last Tuesday.
House and dairy prices were once increasing together, but now dairy prices have dived, their impact on the economy is being more closely analysed.
Mr Bascand said: ''I think it's a question of how long that dairy price decline continues.
''In the short term the housing market's probably dominating. In a year's time, if dairy stays low, maybe the forces will be a little bit more equal.''
