National, ACT thank Finance Minister Grant Robertson for taking their advice by writing to Reserve Bank on house prices

National and ACT are thanking Finance Minister Grant Robertson for taking their advice by writing to the Reserve Bank and asking it to consider rising house prices when tackling inflation. 

"I'm glad he's following our lead because it is so important to New Zealanders, particularly to first-home buyers. We need to deal with this properly and we need to look after New Zealanders," National's Andrew Bayly told reporters on Tuesday. 

ACT leader David Seymour claims he came up with the idea first: "It is a fact that ACT has been saying longest and strongest that we need to start looking at asset price inflation when we look at other inflation."

He added: "It is simply unsustainable that the Reserve Bank looks at the price of petrol, pizzas and cigarettes but not the most important asset that most New Zealanders will buy.

"I think Grant Robertson has done the right thing today. We support him in that and we hope that he'll look to ACT because there's a lot more ideas where that came from."

Robertson earlier announced that he had penned a letter to Reserve Bank Governor Adrian Orr requesting that he consider how it can help to stabilise house prices, which have increased by 20 percent on last year. 

Robertson is seeking advice from the Reserve Bank on whether to include stability in house prices as a factor for consideration in the Remit when formulating monetary policy. 

The Reserve Bank's Remit is its operational objective. It currently includes keeping inflation between 1 and 3 percent, with a focus on keeping it near the 2 percent mid-point; as well as supporting sustainable employment.

"House price instability is harmful to our aims of reducing inequality and poverty, and is also likely to negatively impact the Government's aim of creating a more productive and inclusive economy," Roberson said in his letter to Orr.

"This is particularly the case where investments in the economy are increasingly being made in the existing housing stock, rather than in other more productive assets."

Robertson appeared to be referring to the Reserve Bank's Funding for Lending Programme (FLP), making up to $28 billion available to banks at the record low-interest rate of 0.25 percent, to lend and help stimulate the economy. 

These types of monetary policies are used to help reduce unemployment during a recession in the hope that less expensive credit will entice businesses into borrowing more money and thereby expanding. 

Bayly, National's shadow Treasurer, recently expressed concern that the FLP was being rolled out without any requirement for the new lending to be targeted at productive investment such as helping small businesses innovate. 

He feared it would add even more pressure to an already stretched housing market and suggested that Robertson "rein in the Reserve Bank" by ensuring the FLP is "targeted at the more productive parts of our economy", not the housing market.

"I think that is an excellent thing to do," Bayly said after Robertson's announcement. 

"It's something I've been pushing for some time because the rapid rise in house prices in New Zealand is something that is bad for all New Zealanders, particularly first-home buyers, and I think this is one of the mechanisms to try and make sure we reduce or at least stop rapid rises in house prices."

Robertson disputes that he copied the idea to contact the Reserve Bank. He argued that National wanted the Government to go further than it has by telling the Reserve Bank where to direct its funding. 

"What National was proposing was actually directly intervening and directing the Reserve Bank around a specific programme, the Funding for Lending Programme," Robertson said. 

"What I'm doing is appropriately using the tools that we do have at our disposal... The actual operations of monetary policy, I still believe in the independence of the Reserve Bank to do that."

The Reserve Bank is also considering bringing back loan-to-value restrictions (LVRs) next year, meaning banks would once again require a deposit of 30 percent from investors to get a mortgage and 20 percent from home occupiers. 

Bayly is suggesting the Reserve Bank might consider looking at targeting the FLP and LVRs to help first-home buyers and small businesses rather than property investors.

Reserve Bank Governor Adrian Orr confirmed he had received Robertson's letter and welcomed the opportunity to contribute to the Government's efforts to improve housing affordability.

He said the Reserve Bank will consider Robertson's suggestion and respond with "considered feedback" in due course. 

Orr said he could "assure" Robertson that the Reserve Bank "gives consideration to the potential impact of monetary policy on asset prices, including house prices".

The Greens are frustrated that the Government will not reconsider introducing a capital gains tax as another tool to help bring down housing prices. 

During the election campaign Labour promised no new taxes except for its new top tax rate of 39 percent on income earned above $180,000, and Robertson confirmed he has no intention of changing course. 

"It is a disservice to New Zealanders not to use all of the tools in the toolbox to fix this runaway housing crisis, and that includes taxing wealth or capital," said Green Party co-leader and housing spokesperson Marama Davidson.

Robertson said he is also seeking advice on the demand side of housing. The Government intends to repeal the Resource Management Act (RMA), the complex piece of planning law blamed for holding back new developments.

The Greens' finance spokesperson Julie Anne Genter says that doesn't go far enough. 

"Blaming the RMA is a tired excuse. No doubt the RMA needs fixing, but it's only one factor. It won't fix property speculation or land-banking. It is time to courageously put the case for measures that will help end growing inequality in this country."