New Zealand to solve housing woes
WELLINGTON: The New Zealand government has asked the central bank (CB) to consider factoring house prices as part of its monetary policy remit, Finance Minister Grant Robertson said, boosting the local dollar on market bets of less stimulus over the next year.
As policymakers grapple with soaring house prices and the risk of a property bubble, Robertson said the government was reviewing housing policies, and had writen to the Reserve Bank of New Zealand ( RBNZ) asking what it could do to help slow a property boom. He proposed taking house prices into account while formulating monetary policy, along with the bank’s existing mandate of inflation and maximum employment.
“I think this move threatens the independence of the bank and brings to question what areas the Reserve Bank needs to focus on now,” said Brad Olsen, senior economist at Wellington-based economic consultancy firm Infometrics.
The New Zealand dollar jumped to $0.6985, its highest since mid-2018, as the government’s move was seen as reinforcing expectations the central bank will resist moving toward negative interest rates next year.
“I am concerned that the recent rapid escalation in house prices, and forecasts for this to continue, are affecting the government’s ability to meet the economic objectives set out in the remit,” the finance minister said in the leter to RBNZ Governor Adrian Orr.
In response, Orr said the bank will consider the suggestion, but added that monetary and financial regulatory policy alone could not address the issues as there were “long-term, structural issues” affecting housing affordability.
Historically low interest rates, along with other monetary and fiscal stimulus to support a pandemic-hit economy have fired up New Zealand’s housing market, wrong-footing many economists who had expected a slowdown ater years of rising prices.