National MP Andrew Bayly is fired up at Finance Minister Grant Robertson for "taking far too long" to respond to the Reserve Bank's suggestions on easing rising house prices.
But the Finance Minister says National spent nine years denying there was a housing crisis, and the Government is "actively taking steps" to address the issue.
Robertson wrote to Reserve Bank Governor Adrian Orr in November seeking advice on whether to include stability in house prices as a factor for consideration in the Reserve Bank's remit when formulating monetary policy.
The Reserve Bank's Remit is its operational objective. It currently includes keeping inflation between 1 and 3 percent with a focus on keeping it near the 2 percent midpoint, as well as supporting maximum sustainable employment.
Robertson's request came after house prices soared by 20 percent on the same time in 2019, defying predictions of a COVID-19 crash. Median house prices in Auckland recently surpassed $1 million, well beyond the reach of many first-home buyers.
Orr released his official response to Robertson a month later, rejecting the suggestion of adding a house price consideration to its monetary policy remit, and instead suggesting the Government add it to its financial policy remit.
The Finance Minister is required to issue a financial policy remit, providing matters that the Reserve Bank Board must consider when pursuing its financial stability objective.
Orr said this option was preferable to adding a house price consideration to the monetary policy remit, because the latter could result in trade-offs with its other objectives.
He has also stressed the need for a single agency to coordinate the Government's response to rising house prices. He said the Reserve Bank welcomes the opportunity to participate within the Government's wider response.
Robertson is yet to respond to Orr's suggestions.
Speaking to reporters in Nelson on Thursday, the Finance Minister said the Government will make its intentions clear in late February, once it has considered the advice from both the Reserve Bank and Treasury on demand-side initiatives.
Prime Minister Jacinda Ardern said the Government's actions will "aim to tilt the balance toward first-home buyers and aim to take some heat" out of the market.
"We've had ongoing discussions since we received a letter back from the Governor, and so when we come to make our demand-side announcements, I'd hope to be able to talk about how we'll be working with the Reserve Bank as well," said Robertson.
Bayly, who is part of National's finance team, said Robertson is taking too long.
"Grant Robertson's announcement that he will respond later this year to the Reserve Bank's suggestions for more tools to cool the housing market isn't good enough," he said on Friday.
"Given the Finance Minister has access to almost 400 employees at Treasury, this is an unnecessary and unacceptable delay."
Robertson told Newshub on Friday ministers will consider the advice from the Reserve Bank and Treasury over the coming weeks and an announcement will be made by the end of February.
"The National Party spent nine years in power denying there was a housing crisis, and this Government is actively taking steps to address it," he said.
"But rushing through changes in a volatile market would not be the responsible thing to do, so it's no surprise that's what National is suggesting."
How does the Reserve Bank affect housing?
Until May 2020, the Reserve Bank used loan-to-value ratio (LVR) restrictions to cap banks' mortgage lending to borrowers that have low deposits. The restrictions were removed to help maintain credit flows.
The Reserve Bank now intends to bring them back to help reduce the house purchasing frenzy.
Real Estate Institute data shows the number of residential properties sold in November across New Zealand increased by 29.6 percent from the same time in 2019. It's the highest number of properties sold in 13 years.
Orr is now calling on the Government to support its bid to introduce debt serviceability restrictions, such as debt-to-income (DTI) limits, on mortgage lending.
The Reserve Bank also has its Funding for Lending Programme (FLP) - making up to $28 billion available to banks at the record low interest rate of 0.25 percent to lend and help stimulate the economy.
Some have questioned if the FLP will add even more pressure to an already stretched housing market because there is no requirement for banks to target the lending to productive investment, such as new businesses, rather than property investors.
But Orr says restricting the FLP to only new business lending would limit its impact.
"The FLP's monetary policy effectiveness would be impaired."
