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Business leaders are not backing the National Party’s call for the government to “control” the Reserve Bank and insist that conditions be set for new funds.
Business New Zealand Director Kirk Hope and Shadow Treasurer Andrew Bayly.
Photo: RNZ / Richard Tindiller / Dom Thomas
The National Party wants the government to ensure that the $ 28 billion Loan Financing Program targets the most productive parts of the economy, so that it doesn’t flow into an already unaffordable housing market.
Shadow treasurer Andrew Bayly said that while the Reserve Bank’s independence was paramount, without strings attached, he believed that real estate investors would take the funds.
He said the government can and should be clear about its expectations.
“All I’m suggesting is that if the government is clear that we don’t want to see a rapid escalation in house prices, the Reserve Bank is smart enough to be able to come up with the best policies to implement to make sure that they don’t continue. happening, “he said.
But Business New Zealand director Kirk Hope wanted the government to stay on the sidelines, saying lending decisions were best left to the banking sector.
“You’ve already seen some of the banks go out and, for example, introduce their own loan-to-value restrictions on housing, so I think they are in the best position. [position] to make the risk decisions about where they lend and you can expect them to lend where they can make the biggest difference, “he said.
Kirk said the loan scheme was aimed at lowering interest rates and that if the benefits of that were passed on to businesses and consumers, that was a good thing.
He wasn’t concerned that most of it might end up in the pockets of real estate investors.
“The way the scheme is set up is that it is a proportion of banks’ assets and they will have to choose who they lend to. The clearly stated purpose is to provide cheaper financing costs for businesses and consumers, and I think that it’s important right now, “he said.
Last week, the Reserve Bank unveiled a new Loan Financing Program, which is expected to be implemented next month.
Photo: RNZ / Alexander Robertson
Infometrics senior economist Brad Olsen said National was walking a dangerous path with its call to control the Reserve Bank, which was simply doing its job with the blunt tools it had.
“It is quite clear that the increased activity in the housing market has been driven by low interest rates. I’m not sure exactly how else we were supposed to try to lower interest rates to stimulate economic activity.” Olsen said.
“The risks I assume of doing nothing actually outweigh the heat in the housing market.”
Olsen blames skyrocketing house prices for successive governments’ failure to build more homes.
He said that insisting that the Reserve Bank target new business loans would complicate matters and, in the end, not make much of a difference.
“I think that the acceptance by companies would be relatively moderate today. If you ask a lot of companies at this time, they are telling you that they do not want to borrow because they do not know what will come in the future, no I do not want to take some of these great investment decisions. “
But Andrew Bayly rejects it.
“There’s always demand from businesses. What we’ve seen is that basically $ 6.5 billion is coming out of the corporate sector and into the housing sector. So to say that there are no longer any requirements for business loans, I think that’s a heroic assumption. “, said.
Kirk Hope said companies had been in a bit of a waiting pattern, waiting to see the elections and the pandemic unfold.
But with the economy sturdier than anticipated, expect to see increased demand for credit in the New Year.
