Bay of Plenty Times

House price ‘hot potato’ go­ing on

Gov­er­nor blasts me­dia mes­sen­ger, min­is­ter calls shots

- Hamish Rutherford Business · Finance · Real Estate · Employment · Society · Reserve Bank of India · Sweden · Grant Robertson · German Ministry of Finance

Afort­night ago, Re­serve Bank gov­er­nor Adrian Orr com­plained to re­porters abouthow­much­more they wrote about house prices than about the labour mar­ket.

Or­rwas clearly get­ting tired of tak­ing ques­tions about the na­tional ob­ses­sion with prop­erty, as he yet again­made­the point that con­trol­ling house prices, per se, was not his job.

While the cen­tral bank keeps a watch­ful eye on risky bank lend­ing to any sec­tion of the econ­omy, when it sets in­ter­est rates it fo­cuses on keep­ing in­fla­tion low and sta­ble, as well as try­ing to boost em­ploy­ment.

Yes­ter­day morn­ing, Or­rwas back in front of the me­dia, grudg­ingly ac­knowl­edg­inghow­im­por­tant hous­ing af­ford­abil­ity is, but hint­ing that it­was the me­dia el­e­vat­ing it above other im­por­tant is­sues and work the cen­tral bankwas­do­ing.

“Yes, the hous­ing is­sue, etcetera, is an is­sue. It’s been an is­sue for­ever,” he said. “Just as, by the way, can I say, [are] the­manyother thingswe deal with, such as fi­nan­cial in­clu­sion, cli­mate change and the re­sponses to that.

“House prices sell news­pa­pers.” Orr is at once cor­rect, but also guilty of a bla­tant case of shoot­ing the mes­sen­ger.

This time at least, the rea­son he was be­ing asked, over and over, about the state of the hous­ing mar­ket could not sen­si­bly be blamed on ed­i­tors.

Aday ear­lier, Fi­nance Min­is­ter Grant Robert­son stood in front of re­porters, vol­un­teer­ing that he had writ­ten Orr a let­ter that morn­ing sug­gest­ing he pay at­ten­tion to house priceswhen­set­ting in­ter­est rates.

Although it was framed as merely a sug­ges­tion— an­de­ven if the Re­serve Bank should agree, it would not likely form any part of pol­icy for months— the let­ter had a sud­den im­pact on what fi­nan­cial mar­kets ex­pect the Re­serve Bank to do with the of­fi­cial cash rate.

Ac­cord­ing to fig­ures from West­pac, the odds that the Re­serve Bank will cut theocr­some time in the first half of next year vir­tu­ally halved on Tues­day, even af­ter traders had seen the Re­serve Bank’s re­sponse to Robert­son, that it al­ready paid at­ten­tion to house prices.

Orr in­sisted yes­ter­day that the let­ter­was not a chal­lenge to the Re­serve Bank’s in­de­pen­dence, but someaw­fully big bets are be­ing taken that in­ter­est rates are not go­ing as low as pre­vi­ously thought, and the only thing that­movedthe di­al­was the Min­is­ter of Fi­nance.

Since he be­camegov­er­nor in 2017, Orr has done lit­tle to shake off the idea that his politics align with the Bee­hive, im­plor­ing the Gov­ern­ment to help hi­mout by spend­ing­moreto hel­phim­meet his spend­ing tar­gets and fre­quently adopt­ing the lan­guage of well­be­ing.

Orr has been far­morewil­l­ing to ap­pear in grin­ning photos with politi­cians than he has been to crit­i­cise them.

In the face of a sub­tle, yet clear in­ter­ven­tion into the bank’s busi­ness, Orrshowed­signs that hemaybe will­ing to push back harder than be­fore, even though he tried to frame Robert­son’s in­ter­ven­tion as a cry for help that he washappy to an­swer.

As he re­vealed that the Gov­ern­ment was­re­view­ing the fac­tors driv­ing the hous­ing mar­ket, Robert­son con­firmed yet again that it had no plans to touch tax set­tings, which tend to favour in­vest­ment in prop­erty over other as­set classes.

Orr pleaded ig­no­rance. Asked if the Re­serve Bank would of­fer ad­vice on tax set­tings, he said he did not knowwhethe­r it wa­son the agenda. “One would as­sume is­sues of tax­a­tion would be in the broader work agenda.”

Later, he saidnz­house prices had been looked at so­many­times that the is­sue­was not iden­ti­fy­ing the prob­lem. In­stead, the is­sue­wasthe “ap­petite for ac­cept­ing pol­icy rec­om­men­da­tions”.

The fact that house prices are surg­ing even as­newzealand emerges from a short but se­vere re­ces­sion is clearly a func­tion of the ul­tra-low in­ter­est rates which the Re­serve Bank is re­spon­si­ble for.

But the big­ger and longer-term is­sues are tax set­tings that en­cour­age prop­erty in­vest­ment, and plan­ning laws which in­flu­ence sup­ply.

Re­spon­si­bil­ity for these sit with the Gov­ern­ment, some­thing Orr is morethan ca­pa­ble of ar­tic­u­lat­ing.

Bytry­ing to pass the buck for the re­cent price in­creases to the Re­serve Bank, Robert­son­may­open him­self to­some­home­truths from the gov­er­nor that the real prob­lem lies with the Bee­hive.

 ??  ?? Grant Robert­son
Grant Robert­son
 ??  ?? Adrian Orr
Adrian Orr

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