Government clutching at straws on housing
In a rather predictable statement last week, the Reserve Bank reiterated their commitment to keeping interest rates low for an extended period, and that any short-term inflationary pressures are just that, short term and temporary. This messaging has clearly rattled some in central government.
Housing affordability continues to be the thorn in this governments side. The latest REINZ house price index had prices up 19.2% year on year which clearly feels like an unsustainable level of house price growth. Whilst this is expected to moderate as the impact of lower interest rates reduce and the reintroduction of LVR restrictions take effect, the issue remains politically unpalatable.
Following on from the RBNZ announcement, New Zealand finance minister Grant Robertson has responded by announcing that the ‘Reserve Bank is now required to consider impact on housing when making monetary and financial policy decisions.’ Is this meant to be a new development?
Financial stability for the overall economy has always been part of a central bank mandate, with the housing market a component of this. To specifically imply that the state of the housing market is now part of an already growing remit for the RBNZ is ridiculous. Remember, this is a government that promised to build 16,000 houses over three years and at last count the number was less than ~700. Furthermore, after campaigning and subsequently ‘rolling over’ on capital gains tax they appear hell bent on finding some other scapegoat to blame for the rapid house price appreciation.
Adrian Orr’s tenure as the Reserve Bank Governor to this point has had no shortage of challenges. Central Banks will always be subject to pressures from government but the value of their independence should not be understated. Whilst social issues such as housing are an ongoing issue, monetary policy and financial stability fit the job description.
If the government want to address the so-called housing crisis, how about taking a look in the mirror rather than searching for someone else to blame.