The Government’s tinkering with monetary and financial stability policy is doing nothing to address rampant house price inflation
Instead, the Finance Minister Grant Robertson is using the Reserve Bank as a scapegoat for the Government’s failure to break down the barriers and costs to encourage the building of new houses, a failure that is the real cause of house price inflation.
“The Reserve Bank’s proposed new LVR restrictions are fine as long as they don’t inhibit owner-occupied house buyers, especially first home buyers,” says Mr Bayly.
“But the Government’s real focus should be on removing the barriers to building new houses. As the Reserve Bank Governor himself said before being corralled by the Minister of Finance, the real challenge with the housing market is a lack of supply and the factors preventing building, such as access to the land and planning rules.
“If the Reserve Bank thinks that debt-to-income ratios and interest rate floors are required for financial stability, we look forward to seeing them make the case. But this tool shouldn’t detract from the real cause of house price inflation – failure to move faster to get more new houses built.
“Minister Robertson’s continued attempts to shift responsibility for housing affordability onto the Reserve Bank is distracting it from its core mission of price and financial stability. It would be better if he left them to get on with their job and that he got on with his.
“What’s missing from the Government’s focus on lending is how we can get more of it directed toward the more productive side of the economy. We really need to start focusing on growing the economy, not putting up barriers.”