Central bank must now take into account government policy relating to more sustainable house prices
The government has required the Reserve Bank of New Zealand (RBNZ) to consider how its monetary and financial policies could impact the housing market before making any decisions.
Finance minister Grant Robertson said changes to the central bank’s Monetary Policy Committee now require it to “take into account government policy relating to more sustainable house prices, while working towards its objectives.”
“The committee retains autonomy over whether and how its decisions take account of potential housing consequences, but it will need to explain regularly how it has sought to assess the impacts on housing outcomes,” said Robertson, adding that a direction has also been issued (under section 68B of the Reserve Bank Act) to the RBNZ requiring it to have regard to government policy on housing in relation to its financial policy functions.
“The bank will have to take into account the government’s objective to support more sustainable house prices, including by dampening investor demand for existing housing stock to help improve affordability for first-home buyers,” said Robertson.
The lending industry welcomed the announcement, with Roger Beaumont, chief executive of the New Zealand Bankers Association, saying that banks are “keen to be involved in discussions around how to tackle the current housing situation.”
“There’s no single solution to our current housing affordability issues, which is a complex challenge,” said Beaumont. “Potential responses include addressing both supply and demand issues. Today’s announcement is more about managing the demand side, and what mechanisms the Reserve Bank has available to do that. That will likely have implications for bank lending. Our banks will continue to be responsible lenders and welcome the opportunity to be part of any further solutions.”
For its part, the opposition National Party said that it welcomed the announcement but expressed concern that it was “too slow in coming.”
“Directing the Reserve Bank to factor the impact on housing into monetary and financial policy decisions is the right move,” said Andrew Bayly, National’s shadow treasurer. “The issue is how long it took the government to realise this.”
“Grant Robertson wasted precious time obfuscating, ducking and diving when he should have been acting,” added Bayly. “House prices have increased by more than 40% under Labour. Let’s hope it doesn’t take another year for the finance minister to introduce fiscal measures that the Reserve Bank has been advocating for to curb runaway house inflation.”