Bid to cool housing market
WELLINGTON: Finance Minister Grant Robertson has called on an important ally in the Government’s attempts to tame New Zealand’s wild housing market.
Mr Robertson has publicly lobbied Reserve Bank governor Adrian Orr to do more to cool New Zealand’s redhot housing market.
It comes at a time when house prices have grown 20% in the space of a year, while the rest of the economy grapples with a recession. The move, Mr Robertson hopes, will help bring about a period of ‘‘sustained moderation’’ to New Zealand’s housing market.
In the meantime, the Government is looking at various demandside measures, such as extending the brightline test, which would help relieve pressure.
He publicly released a letter he sent to Mr Orr, asking him to expand the RBNZ’s mandate to cover house price stability.
The move was welcomed by the Opposition, both Act and National saying the letter was a good idea, although both claimed credit for the move.
However, one economist was less convinced.
‘‘The letter from the Finance Minister seems to be a kneejerk response to soaring house prices and appears as a way to shift the blame and appear proactive on the housing front,’’ Infometrics senior economist Brad Olsen said.
In his letter to Mr Orr, Mr Robertson said he was ‘‘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’’.
In a separate press release, he said that given the extended period of lowinterest rates, ‘‘now is the time to consider how the Reserve Bank may contribute to a stable housing market’’.
At the moment, the Reserve Bank’s mandate includes controlling inflation, supporting sustainable employment and ensuing financial stability. There is nothing specifically about house prices.
After Covid19 started significantly affecting the New Zealand economy, the Reserve Bank slashed the official cash rate and flooded the market with tens of billions of dollars’ worth of bond buying — essentially printing money.
The Reserve Bank said this helped stimulate the economy, but economists have argued it has pushed up house prices.
Despite this, Mr Robertson said he was not blaming the Reserve Bank for the rapid house price inflation.
Mr Orr replied later yesterday in a letter posted on the bank’s website. He said the RBNZ welcomed the chance ‘‘to contribute to your work programme aimed at improving housing affordability’’.
‘‘As I’ve said publicly on many occasions, monetary and financial regulatory policy alone cannot address this challenge. There are many longterm, structural issues at play.’’
He also said: ‘‘We will consider your suggestion of how the Monetary Policy Committee (MPC) could further take into account house prices when formulating monetary policy, and will respond with considered feedback in due course.’’
Mr Robertson said he had sought advice from The Treasury about ways the Government could tame the housing market, such as such as the brightline test and ringfencing rental losses.
Independent economist Cameron Bagrie said the RBNZ needed to have debttoincome limiting tools, which would work to dampen house price demand.
Although the Government has ruled out any further tax increases to cool the housing market, the Greens say tax is the way for the Government to make meaningful changes to the housing market.