ACT Party leader David Seymour is accusing Reserve Bank governor Adrian Orr of being a liability, saying his latest announcement harks back to the days of Robert Muldoon.
The Reserve Bank has announced a new lending programme - offering to pump another $28 billion into the economy over the next couple of years through cheap loans to banks.
Seymour said the country was monetising its debt, avoiding hard choices and instead giving itself artificially low interest rates.
"Currently the Reserve Bank's irresponsible approach to liquidity of the New Zealand dollar is inflating asset bubbles, it is meaning a generation of young people watch the future get further away from them as a result and that is a recipe for political dissatisfaction and unrest," he said.
Seymour criticised Orr.
"It is time to identify the personality of the current Reserve Bank governor as a liability, because he is a risk-taker, I think in his own mind a visionary and yet he is doing unconventional things that are actually quite perilous.
"They are not new ideas, but actually old ideas that have failed in a costly way before."
He said ACT was the first to defend the Reserve Bank's independence, but it was now using its remit in ways not originally intended.
"We have a Reserve Bank that has engaged in the most unconventional monetary policy since Robert Muldoon was in charge," Seymour said.
The Government needed to signal it would not support the kind of monetary policy in play, he said.
Finance Minister Grant Robertson dismissed Seymour's comments as unhelpful.
"The Reserve Bank has got a job to do here, they need to manage inflation and they have got a target for that and we have given them a role of working towards maximum sustainable employment," he said.
Adrian Orr told Morning Report the Reserve Bank has a very clear mandate provided through appropriate legislative process.
"It's a mandate to ensure inflation, consumer price inflation remains between 1 in 3 percent per annum on average over time and that we contribute to maximum sustainable employment and that is exactly what we are doing," he said.
"We are doing nothing that any other central bank is not doing, we're very much strictly ballroom I would say."
He said lower interest rates globally have been a significant part of meeting the challenge the global economy is facing.
The Reserve Bank is wanting to make sure banks aren't taking on excessive high interest loans, he said.
"We're worried that as higher risk loans begin to mount up that that becomes a risk to the financial system as a whole."
He said as exciting as the housing price story is, it's not the main story for the country.
And the New Zealand economy still has massive changes ahead.
"Unemployment is high and rising, inflation is low, too low and we have much work to do around resource allocation."
National's newly minted shadow treasurer Andrew Bayly was not as critical of the Reserve Bank as Seymour, but said the Government had to ask hard questions about the effects on housing.
"We would like to just make sure lending is happening in the right areas of the economy to try and grow the economy, as opposed to just seeing a perpetuation of buying and selling existing houses," he said.
Bayly was surprised the Reserve Bank had not followed Australia's lead and put some conditions on the massive new lending.
The Reserve Bank's policies were becoming highly contradictory, he said.
"On one hand, the Reserve Bank is adding fuel to the fire of the housing market with its accommodating monetary policy and on the other hand the Reserve Bank is trying to cool the housing market down by announcing Loan to Value ratios will come into force early next year."
He said the National Party is highlighting the significant new funding going into the housing market but there's been a reduction in lending to the business sector.
"As a result of the Reserve Bank making funding available, unfortunately it's not going into the productive areas of the economy - that's the issue we've got."
Robertson said ultimately the decisions on lending to customers would come down to trading banks.
"I'm really encouraging them to consider supporting small businesses, making sure that there is a focus on getting investment there into the productive economy.
"These are the decisions they need to make and I hope they will support that kind of the economy."
Bruce Patten, a director of Auckland mortgage brokerage Loan Market, told Morning Report this is the busiest he's seen the market in 20 years.
"It couldn't get any busier than it is... I just don't think the banks could cope with any more."
He said he thinks the market will just keep going.
"People aren't stretching, there's still somewhere between five and maximum six times their income."
But, he says, more people - like single people and first home buyers - are getting priced out of the market.
Successive councils and Governments haven't done their job, he said.
"The only reason we've got this problem is through nothing more than a shortage of property."
Sharon Cullwick, executive officer of the Property Investors' Federation, says a lot of property investments are looking at increasing their portfolio without buying, by doing things like subdividing property.
"The only thing is it takes about a year if you've got a house that needs to be demolished for example - removing one and putting three or four or whatever it may be - it takes about a year before you receive and income back from that."
She said there's no incentive to do it.
Some property investors will be snapping up property over the summer, she said.