Updated 3.55pm: A warning that the housing bubble may burst.

It comes from the Reserve Bank.

Governor Graeme Wheeler is warning any sharp correction in the housing market will lead to financial instability.

He says along with Norway, New Zealand has one of the greatest gaps between house prices and incomes.

Auckland house prices are 39% higher than they were in 2007 and Christchurch is 27% higher.

Mr Wheeler says the bank will be talking more about the housing market over the next few months, hinting at possible further corrective measures from the central banker.

He says house price inflation poses significant risks to the broader economy, and so resolving the housing shortage, particularly in Auckland, is key.

The Auckland Council estimates 10,000 houses a year will be required for the next three decades.

Meanwhile the official cash rate will remain stable, as risks around the global economy create challenges for the Reserve Bank.

Reserve Bank Governor Graeme Wheeler has announced the news to the Canterbury Chamber of Commerce this afternoon.

He says the New Zealand economy is performing well, but dairy prices, oil prices, house prices, and the exchange rate have been made uncertain by the Chinese economy.

Graeme Wheeler says any future interest rate adjustments, either up or down, will depend on future economic data.

China Warning

The Reserve Bank's warning China's troubles could impact here.

Governor Graeme Wheeler has described the economic powerhouse as the greatest global success story of the past 35 years.

But, he says the world's greatest trading nation is slowing down, and how it manages its reduced growth is the key to the world's economy.

China now ranks as the number one or two trading partner for more than a hundred countries.

China and Australia now take around 38% of our exports.

China's the largest global importer of whole mike powder with 90% of it coming from New Zealand.

The recent drop in prices has seen our farmers taking a six billion dollar hit with their debt trebling since 2003 and with half of it being held by just 10% of farmers.