Question 1: Who creates most of the money in New Zealand?


Answer to Question 1

Answer:  (c) — Private banks create almost all the money in New Zealand.  The Reserve Bank produces the notes and coins, which amounts to approximately 2% of the money in circulation and private banks create the rest.

Question 2: Where do Banks get most of the money to make loans?

Answer to Question 2

Answer: (d) — Banks create new money out of nothing when they make loans, through a simple accounting entry1. “Rather than banks receiving deposits when households save and then lending them out, bank lending creates the deposits”2.


  1. The Future of Money – Stewardship, Reserve Bank of New Zealand (2021), page 47. “The money that New Zealanders use most often in their daily lives is commercial bank money. A commercial bank creates money when it makes a loan to a customer and credits that customers’ bank account with a deposit equal to the size of the loan.”
  2. Bank of England Quarterly Bulletin 2014 Q1 Money Creation in the Modern Economy’ — The Bank of England was the first central bank to describe openly how money is created. Also backed up by the German central bank, Deutsche Bundesbank, in ‘The role of banks, non-banks and the central bank in the money creation process’ (April 2017).
When you deposit money in a bank, who owns it?

Answer to Question 3

Answer: (a) — Only 2% of the money used in New Zealand is notes and coins. 98% of the money is electronic, made by private banks.

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