Finance Minister Grant Robertson is making a move to try and get the housing market under control – as prices skyrocket and demand continues to rise.
The Government’s review of housing settings is to focus on improving access for first home buyers and to ensure the housing market did not distort the economy.
Robertson pledged they would do “everything we can do to enhance supply and look at other measures”, which included asking the Reserve Bank to assess what tools it could use around housing demand.
“Everybody needs to be involved,” Robertson said. “We can and should do more. This is a situation (that is) unprecedented… we must look at all the levers.”
Robertson said the intention was to have stability in the housing market and for first home buyers to “know they will have a shot”.
He was also seeking advice around measures similar to that of altering the bright line test and the rules around foreign buyers.
The bright line test places income tax on the gains from the sale of a residential property within five years, other than the main home.
Robertson said the Government had been clear about the policy responses they would not implement – a capital gains tax or wealth tax has been ruled out by Prime Minister Jacinda Ardern – but he added there were other options that needed to be investigated.
That included loosening up “overly restrictive planning rules”, with work having begun on replacing the RMA.
He added they would examine barriers to affordable housing and the Government was looking at new ways to increase supply.
‘Very different proposal’
Robertson also followed National’s revenue spokesperson Andrew Bayly’s plea to write to the Reserve Bank – however Robertson said it was a “very different proposal” to what Bayly asked for.
Bayly said last week the Government needed to "rein in" the Reserve Bank and sent a letter of expectation after it rolled out a Funding for Lending Programme.
“Now is the time to consider how the Reserve Bank may contribute to a stable housing market,” Robertson said.
In the letter to Reserve Bank Governor, Robertson wrote: “I am concerned that the recent rapid escalation in housing prices, and forecasts for this to continue, are affecting the Government’s ability to meet the economic objective”.
The Government’s economic objective was to improve the wellbeing and living standards of New Zealanders.
He was also concerned about the risk the price increases posed to financial stability to the economy.
“Housing price instability is harmful to our aims of reduced inequality and poverty,” Robertson said.
One suggestion Robertson made to the Reserve Bank was to “better highlight” that the monetary policy committee takes housing prices into consideration when developing monetary policy.
“I believe it is right that we consider how these tools might be impacting the housing market, with particular regard to housing price inflation,” Robertson stated in the letter.
New Zealand’s median house price has continued to soar, with Auckland hitting $1 million in October and the median house price across New Zealand increasing by 19.8 per cent, from $605,000 in October last year to $725,000, according to The Real Estate Institute of New Zealand (REINZ).
The audited Crown accounts to June 2020 were also released today.
Secretary of the Treasury Caralee McLiesh said New Zealand’s economy “has proven more resilient than originally anticipated”.
However, she said the country was in a challenging economic and financial circumstance, that was not likely to end soon.
Robertson said the Crown’s books were better than expected.
“The cost of servicing this debt remains very low by historical standards.
“The Covid-19 pandemic will continue to have an ongoing impact on the global and New Zealand economies for a number of years,” Robertson said.
Deficit: $23.1 billion (7.5% of GDP) in 2019/20
(Made up of a total revenue of $116b and total expenses of $138.9b)
Operating balance for 2019/20: A deficit of $30.0 billion
Core Crown tax revenue: $85.1 billion
Core Crown expenditure: $114 billion
Net core Crown debt: 27.0% of GDP - increased by $25.7 billion from $57.7 billion in 2018/19 to $83.4 billion in 2019/20
The $23.1 billion deficit was largely a reflection of the pandemic and the Government’s response to it – the financial statement read.
It also said the slowdown in the economy contributed to the drop in core Crown tax revenue of $1.4 billion, while the Government’s fiscal response to the pandemic drove a large $21.8b increase in core Crown expenses, compared to the previous year.
The Reserve Bank’s large scale asset purchase (repurchasing Government bonds on the secondary market) saw $3.3 billion of losses recognised.