NEW Zealand's central bank is to increase the range of securities it will accept from lenders to help increase liquidity in the nation's banking system, mirroring similar moves by authorities in Australia and the United States.

The Reserve Bank of New Zealand will temporarily broaden its securities program and lend against fully secured residential mortgage-backed securities, before they are rated if necessary, Governor Alan Bollard said yesterday.

New Zealand's banks have high-quality assets and have "held up relatively well in the face of the volatility and disruptions that we are seeing internationally," Bollard said. "We are committed to ensuring the ongoing health of the financial system."

New Zealand's economy is in recession after a drought cut farm exports, the housing market slumped and rising costs cut retail spending, Bloomberg News said.

The government this week slashed its economic growth forecast and almost doubled its projected budget deficit.