National's Nicola Willis, Green MP Chlöe Swarbrick continue push for house price briefing after Reserve Bank's 'admission of forecast failure'

National MP Nicola Willis and Green MP Chlöe Swarbrick are not giving up on their quest to get a briefing from officials on house price forecasting, especially now the Reserve Bank has admitted getting it wrong. 

For months, Willis and Swarbrick have been united in trying to get more information on how officials make their forecasts, after house prices increased 25 percent last year - the opposite of Treasury's prediction of a drop due to COVID-19. 

But Labour MPs on the Finance and Expenditure Select Committee (FEC) - which Willis and Swarbrick sit on - continue to block a request for a briefing from officials. Instead, committee members have been "drip fed" documents from officials.

Last month Treasury's admission to committee members in a document that officials use "professional judgement" to predict house prices, rather than a solid economic model, shocked Willis and Swarbrick.  

Since then, Reserve Bank officials have submitted a document admitting that their house price predictions have been wrong, so Willis and Swarbrick are renewing their calls for an in-person briefing to get to the bottom of it. 

"In May 2020 we assumed that house prices would decline by around 9 percent by the end of 2020," the document reads. "The much stronger than expected economy, and the associated improvement in job security, has been a key reason for higher house price outcomes."

Willis told Newshub while she appreciates forecasting is a difficult and imprecise science, the Reserve Bank has been "consistently, badly wrong", and it's too important to let it slide.

"These decisions impact all of us -  not only Kiwis paying a mortgage but savers, workers and potential home-buyers too. If these decisions are being based on inaccurate assumptions, then it's right that we ask more questions.

"Faced with this admission of forecast failure, I think Kiwis would expect MPs to ask the Reserve Bank about how it's going to improve from here. That's why I want them to appear before the Finance and Expenditure Select Committee."

National MP Nicola Willis.
National MP Nicola Willis. Photo credit: Newshub

The Reserve Bank is projecting a "slowing in house price growth", reflecting "much slower population growth over most of 2020 and 2021, tax policy changes, the reintroduction and tightening of loan-to-value ratio restrictions, the waning impact of interest rate declines over 2019 and 2020, and increased supply from strong residential construction". 

Willis wonders if their predictions can be trusted. 

"The Reserve Bank might as well have been playing pin-the-tail on the donkey with its off-beam house price forecasts."

Willis is also concerned about the Reserve Bank using the term "sustainable" house prices rather than "affordable" house prices. 

"While I respect the technical wizardry of Reserve Bank economists, this word-swap amounts to a definitional dance on the head of a pin. The Reserve Bank can magic-up any technical explanation it likes but anyone can see that the pace of recent house price inflation has been utterly unsustainable."

Swarbrick has similar concerns. 

"That interpretation of house price affordability has slipped into something which they're now defining as house price sustainability, which is an entirely different thing, because based on their definition of house price sustainability, you can have a 'sustainable market' that is incredibly unaffordable."

Green MP Chlöe Swarbrick.
Green MP Chlöe Swarbrick. Photo credit: Newshub

Swarbrick is also surprised that the Reserve Bank, along with Treasury and the Ministry of Housing and Urban Development, quietly introduced a technical working group in June to share data and analysis on house price forecasting. 

Swarbrick told Newshub it was set up "around the time I first started suggesting we have these briefings at the Finance and Expenditure Select Committee", yet it was never communicated to the committee at the time. 

"This is brand new information, and pretty interesting."

Willis and Swarbrick will continue to push for a briefing from officials. 

"It's unacceptable for Labour to prevent us from doing this basic job. Why is Labour blocking this scrutiny?  What are they afraid of?  Where is the openness and transparency we were promised by this Government?" Willis told Newshub.

Swarbrick added: "I think for anybody who's been around Parliament for a while will know that I'm very insistent and this briefing request will continue to go forward every single Finance and Expenditure Select Committee until we get it.

"What we've got in the meantime is this piecemeal, drip feeding of information which is completely unsatisfactory, let alone through a democractic process through select committees, that is supposed to hold the Government to account."

FEC chair Duncan Webb, a Labour MP, told Newshub last month members of the committee have ample opportunity to ask oral questions when Treasury appears before them about six times a year, as well as the Reserve Bank which has so far appeared three times. 

"Given the extensive opportunity for examination through normal channels, a special briefing was seen as duplicative by the majority of the committee."