PM hints at firsthome lifeline Capital city’s infrastructure costs explode

WELLINGTON: The Wellington City Council is putting together a budget of infrastructure which forecasts a 23% rates increase for next year.

The council is about halfway through its review of its longterm plan, which signals how it will divvy up its budget for the next 10 years.

Mayor Andy Foster says it will be one of the most challenging budgets considered by the city council.

The council is about to enter what is commonly referred to as the ‘‘tradeoffs’’ stage. This is when decisions are made around what’s prioritised to bring down projected rates increases.

It is understood the starting point is an increase of 23% for 202122.

That includes the Let’s Get Wellington Moving transport project, Three Waters investment, and strengthening the closed central library.

In July the rates increase was forecast to be more like 15%, but that’s because it didn’t yet take into account those three investments.

Deputy mayor Sarah Free said at a committee meeting on Friday: ‘‘This will be very much an infrastructure longterm plan’’.

A narrative has been building across the city that Wellington is ‘‘losing its mojo’’ and the council needs to focus on the basics rather than the bright and shiny. But it’s becoming increasingly clear basic infrastructure will come at a big cost.

Mayor Andy Foster said the council was months away from proposing a consultative draft 10year financial strategy and rates for 202122, and no decision had yet been made.

The council has limited revenue levers to pull to keep rates down.

Additional revenue gathering could come in the form of higher fees and user charges.

Divestment could also be a possibility. — The New Zealand Herald

WELLINGTON: Prime Minister Jacinda Ardern has hinted the Government is looking into ways to help firsthome buyers on to the property ladder by tinkering with the restrictions of its homebuying subsidy scheme.

It comes as the Government remains under pressure about New Zealand’s hot housing market, which continues to soar as the rest of the country grapples with a recession.

The debate has got so heated that the National Party has explicitly called for the Government to ‘‘rein in the Reserve Bank’’— something that challenges the central bank’s independence from ministers.

Ms Ardern questioned this thinking yesterday, calling it ‘‘concerning’’, and said there were good reasons for the separation between the Reserve Bank and government.

For some weeks, Ms Ardern has been pressed on the issue of housing.

House prices are up close to 20% year on year, according to the Real Estate Institute of New Zealand’s house price index.

Ms Ardern said yesterday the Government was looking into adjusting the thresholds for the homestart grant to make it easier for firsttime buyers to get into the market.

The grant enables firsttime buyers access to $5000, or $10,000 as a couple, for their first home.

There are several restrictions at present, including an earning limit of $85,000 per person, or $130,000 for a couple.

Ms Ardern would not say which eligibility requirements might be shifted, but was clear the Government was exploring making changes; when it came to deposits, she said she was looking at ‘‘all options’’.

She was particularly worried that increasingly, the difference between firsthome buyers succeeding and those locked out was whether or not there was parental financial support.

‘‘That’s not the kind of divide we want in New Zealand — it’s not who we are; we want it to be an accessible market.’’

There is a general consensus among economists that the reason for the surge in house prices is rockbottom interest rates, set by the Reserve Bank.

Another key factor is the amount of liquidity the central bank is pumping into the market with its $100 billion bondbuying scheme — this is often referred to as quantitative easing, or money printing.

National Party shadow treasurer Andrew Bayly yesterday went as far as saying the Government needed to ‘‘rein in the Reserve Bank now’’.

‘‘National is calling on the Government to temper the Reserve Bank’s latest inflammation of the property market by sending a letter of expectation to [Governor] Adrian Orr immediately.’’

Mr Bayly said the Government should require the Reserve Bank to earmark the $28 billion it was pumping into the banking sector to flow into productive parts of the economy, such as building new houses and local businesses.

But by law, that is not how the system works; the Reserve Bank Act gives the central bank complete autonomy.

Ms Ardern said National’s calls were a ‘‘significant departure for a political party in New Zealand to move away from what has been longterm consensus around the separation between politicians and the Reserve Bank’’. — The New Zealand Herald