The Press

Orr plans his ad­vice on tax so­lu­tion for hous­ing

- Thomas Cough­lan thomas.cough­

Re­serve Bank gov­er­nor Adrian Orr has re­sponded vig­or­ously to Fi­nance Min­is­ter Grant Robert­son’s plea that he pay mind to rock­et­ing house prices, say­ing he’s likely to give frank ad­vice on tax changes the Gov­ern­ment could use to cool the hous­ing af­ford­abil­ity cri­sis.

Orr point­edly of­fered the view yes­ter­day that ‘‘fis­cal pol­icy is far more ef­fec­tive’’ for mak­ing tar­geted in­ter­ven­tions in the hous­ing mar­ket than mon­e­tary pol­icy but that it is ‘‘in the hands of elected of­fi­cials’’, not the bank.

Fis­cal pol­icy is the re­spon­si­bil­ity of the Gov­ern­ment, not the Re­serve Bank.

Orr wel­comed Robert­son’s let­ter on Tues­day. It asked that the cen­tral bank con­sider chang­ing its re­mit to in­clude some con­sid­er­a­tion of house prices.

Orr said he be­lieved the let­ter re­quested the full gamut of the bank’s ad­vice on the hous­ing cri­sis. This means the so­lu­tions he comes up could be the re­spon­si­bil­ity of the bank, but they could also be the re­spon­si­bil­ity of Robert­son.

The gov­er­nor was asked whether he’d use the op­por­tu­nity to sug­gest some taxes that might help re­lieve pres­sure on the hous­ing mar­ket.

‘‘I as­sume so – that’s how I’ve read the spirit of the let­ter,’’ Orr said.

‘‘There would be tax­a­tion [ad­vice] – I think it would be re­miss to, if the let­ter is open, not to put our best foot for­ward.’’

Robert­son’s let­ter came as the Re­serve Bank un­veiled a $28 bil­lion stim­u­lus pro­gramme that West­pac economists said might con­trib­ute to 15 per cent growth in house prices over the coming year.

Orr’s tax ad­vice prob­a­bly wasn’t what Robert­son had in mind when he wrote to the cen­tral bank re­quest­ing its help in con­fronting ‘‘ris­ing house prices’’.

The Re­serve Bank is re­spon­si­ble for mon­e­tary pol­icy, mainly set­ting in­ter­est rates through the of­fi­cial cash rate.

It is op­er­a­tionally in­de­pen­dent of the Gov­ern­ment, which con­trols fis­cal pol­icy and tax­a­tion.

Most mar­ket watch­ers as­sumed Robert­son’s let­ter would lead to Orr of­fer­ing some mon­e­tary pol­icy so­lu­tions to the cri­sis. These would be eco­nomic levers that Orr him­self con­trols.

But in his pub­lic re­sponses to Robert­son, Orr has been keen to em­pha­sise that he sees his role as much big­ger than just look­ing at what the Re­serve Bank can do to take heat out of the hous­ing mar­ket.

Orr wants to lend the bank’s con­sid­er­able in­tel­lec­tual heft to give the Gov­ern­ment pol­icy ad­vice on what it can do.

‘‘I was very pleased that it’s an open let­ter. That is, it’s not con­strain­ing us to nar­row re­mits of mon­e­tary pol­icy but say­ing, ‘You’ve got a highly ca­pa­ble team here – help pro­vide as­sis­tance and af­ford­abil­ity so­lu­tions,’’’ Orr said.

This could mean of­fer­ing tax sug­ges­tions to a Gov­ern­ment that has been quite clear it doesn’t want to im­ple­ment them.

Prime Min­is­ter Jacinda Ardern has ruled out in­tro­duc­ing a cap­i­tal gains tax, and a wealth tax, two po­ten­tially ef­fec­tive tax tools the Gov­ern­ment could use to take some de­mand heat off the hous­ing mar­ket. A land tax is also not on the po­lit­i­cal agenda.

Orr said he’d have to speak frankly to the Gov­ern­ment, de­spite its many ruled­out taxes. He said us­ing tools such as tax would be a more ef­fec­tive way to en­cour­age hous­ing af­ford­abil­ity than blunt in­stru­ments like the Re­serve Bank’s in­ter­est-rate-set­ting tools.

 ??  ?? Re­serve Bank gov­er­nor Adrian Orr.
Re­serve Bank gov­er­nor Adrian Orr.

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