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ROBERT KITCHEN / Things
Green Co-leader James Shaw
Green co-leader James Shaw says the government needs to use the levers it has to stop the housing market from overheating.
He said these levers could be taxes on capital gains and wealth.
Shaw’s remarks came after the Reserve Bank yesterday announced a plan to offer cheap financing to banks, which they will use to lower interest rates further. This is expected to add more heat to an already overheated housing market.
The plan could end up pumping as much as $ 28 billion into the economy, and much, if not most, of that could end up in the housing market.
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“Cheap bank loans are good for helping businesses, but they lead to house prices skyrocketing even more if they are not countered with a capital tax or wealth inflation,” Shaw said today.
“Low interest rates right now are benefiting real estate speculators and dealing a crushing blow to average earners hoping to afford a home,” Shaw said.
He said low rates were helping speculators and investors, often at the expense of early home buyers.
“We see that people with two or three properties get cheap credit to re-mortgage and buy a fourth and fifth investment property.
“That pushes home prices up, crowding out early homebuyers and creating even more wealth imbalance between the haves and the have-nots,” Shaw said.
Shaw’s comments were very careful. They avoided direct criticism of what the Reserve Bank was doing, but said it was the government’s job to rise to the occasion to mitigate the unintended consequences of the Bank’s actions.
He said these could include “taxing capital gains or wealth to discourage real estate speculation and slow increases in home prices. This must be accompanied by an increase in the supply of affordable public housing where nearly 20,000 families are waiting for a home ”.
Shaw said he would talk to Labor about what to do.
“We will talk to Labor about what we can do to ease the housing market heat, especially now that New Zealand First is not in store to curb or stop progressive policies that will improve the lives of New Zealanders,” Shaw said. .
His comments add to those of National and ACT, who have gone further and criticized the Bank’s decisions and the rules it uses to make them.
David Seymour of ACT wants to consider forcing the Reserve Bank to think about house prices when making decisions about setting the Official Cash Rate, along with decisions about other monetary policy tools.
National’s new treasurer, Andrew Bayly, has also been critical. He said the latest stimulus plan should have targeted businesses better than the housing market.
“Low interest rates and the Reserve Bank’s money printing are simply adding fuel to the fire of New Zealand’s bankrupt housing market,” Bayly said.
“Since March, home loans have increased by $ 8.7 billion, while business loans have fallen by $ 6.1 billion.”
The Bank has dismissed that particular criticism, saying that placing too many restrictions on the scheme would make it ineffective, especially when most companies are too afraid to borrow.
Bayly even asked the government to “ask serious questions of the Reserve Bank and the consistency of its approach.”
The Reserve Bank is very independent and discussing monetary policy and criticizing the way the bank works has historically been seen as a kind of red line for finance spokesmen and finance ministers.
As finance minister, Grant Robertson must be especially careful not to interfere too much with the independence of the Reserve Bank. Robertson, however, set up a scheduled meeting with the Orr, a political sign that he was taking criticism of the bank seriously.
Robertson also praised the Reserve Bank’s decision to consult on the recovery of loan-to-value restrictions (LVR) next year.
