The Government's failure to take action on the Auckland housing crisis is hurting New Zealanders, the Green Party said today after the Reserve Bank left the Official Cash Rate unchanged at 3.5%.
The OCR has been unchanged since July last year and Governor Graeme Wheeler said while house price inflation is elevated in Auckland lower dairy incomes, lingering effects of drought, fiscal consolidation and the high exchange rate are affecting the outlook for growth.
The Greens say the Reserve Bank's ability to lower the OCR to help businesses invest and households pay off their mortgages faster is limited by the Government's inaction with regard to the Auckland housing market.
"Auckland's housing crisis is clearly a drag on the rest of the economy," co-leader Russel Norman said.
"It seems the Reserve Bank is too worried about interest rate cuts further inflating the Auckland housing market."
The Greens are calling for a capital gains tax to help take the heat out of the Auckland market, along with restrictions on sales to foreign buyers.
Mr Wheeler says the economy is continuing to grow at an annual rate of around 3%, supported by low interest rates, high net immigration and construction activity, and the fall in fuel prices.
He says the bank is not currently considering any increase in interest rates and the timing of future adjustments in the OCR will depend on how inflationary pressures evolve.