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By Peter wilson*
Analysis – Finance Minister Grant Robertson asks the Reserve Bank for help in dealing with the housing crisis, Oranga Tamariki CEO says he will not resign, Māori party MPs are retiring on day one and should MPs wear ties?
Grant Robertson is asking the Reserve Bank to make changes in response to the housing crisis.
Photo: RNZ / Samuel Rillstone
Grant Robertson’s letter to the Governor of the Reserve Bank, Adrian Orr, this week was clear evidence of the seriousness of the housing crisis and the urgent need for the government to deal with it or face the consequences in the next election. .
The question is whether the bank’s response to the recession – pumping cheap money into the economy – is going to drive home price inflation. Prices rose nearly 20 percent in the year through October and are forecast to rise another 15 percent next year.
The Reserve Bank intends to give retail banks $ 28 billion to lend at even lower interest rates than they are now. There will be no restrictions on who banks can lend to, and the fear is that most of it will end up in the housing market with investors leading the queue.
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Robertson was asking for help, but it is unclear how much he will get.
The Governor of the Reserve Bank, Adrian Orr, says that monetary policy is a “powerful tool”.
Photo: RNZ / Jane Patterson
Orr’s response was that the Reserve Bank appreciated the opportunity to work with the government on housing affordability, but was already doing what Robertson had asked.
“The MPC (Monetary Policy Committee), when making its decisions, considers the potential impact of monetary policy on asset prices, including house prices.”
Orr does not consider the Reserve Bank to be responsible for the real estate market.
In an interview with Things Thomas Coughlan after Robertson sent the letter, Orr said that fiscal policy was much more effective for specific interventions and that it was in the hands of politicians.
Orr said he believed the letter requested the bank’s full range of advice on the housing crisis. He supposed there could be tax changes to ease pressure on the housing market.
Taxing investors on the large profits they make from buying and selling homes is an obvious way to slow down their activities.
But Robertson and Prime Minister Jacinda Ardern scrapped a capital gains tax and vowed no tax changes will be made during Labor’s second term, other than a new upper level.
Before Robertson sent the letter, the Reserve Bank had decided to reintroduce loan-to-value ratios (LVRs) on home loans, probably starting early next year. LVRs will make it more difficult for people to obtain mortgages, because they will have to have a larger deposit.
Ardern has identified deposits as the number one problem first-time home buyers face and is looking for ways to help them.
In an interview with Morning report On Thursday, Orr said the bank was working on the LVR level, but it was not obvious that they would affect house prices. Many people could still meet the conditions.
He said the bank was “dusting off the investigation” on the debt-to-income ratio. If you bring them, the mortgages will be tied proportionally to income.
That could also hurt young couples who don’t have high-paying jobs and make it even more difficult for first-time home buyers.
Economists reacted in different ways to Robertson’s letter.
Shamubeel Eaqub of Sense Partners said it was “a big wake-up call” for the bank.
“The Reserve Bank right now is causing damage to the economy by creating a bigger housing bubble in the middle of the biggest recession of our life,” he said.
“We can’t blame anyone else. It’s too much credit at low rates for housing.”
Infometrics senior economist Brad Olsen did not think it would fundamentally change the way the bank sets monetary policy.
“You are certainly not going to see any real control over these rampant house price growth numbers any time soon,” Olsen said.
The letter “reinforced” the government’s resignation of responsibility for the housing crisis, “because it refuses to take some of the necessary steps to increase supply,” Olsen said.
Former United Future Party leader Peter Dunne said the housing crisis was “rapidly becoming the government’s Achilles heel” and accused the government of using “diversionary tactics.”
Dunne said successive governments had failed to build enough new houses and that the current crisis could “blow up the government’s parliamentary majority.”
Politician reported that Robertson’s focus on the Reserve Bank was only part of his strategy, and he had asked the Treasury to work on a variety of responses to try to dominate the market.
Another worrying issue for the government that came to a head this week was the controversy over Oranga Tamariki that separated Maori children from their parents.
The agency’s chief executive, Grainne Moss, told a Waitangi court hearing that “structural racism” existed within Oranga Tamariki and needed to be addressed.
Oranga Tamariki CEO Grainne Moss says racism within the agency must be addressed.
Photo: RNZ / Samuel Rillstone
Moss later said that she was not going to resign, even though new Minister for Children Kelvin Davis declined to say he had confidence in her.
Whānau Ora’s minister, Peeni Henare, suggested that Moss would resign “in a couple of hours”, sparking a dispute with Davis.
In a statement to RNZDavis said he had told Henare that his comments were “inappropriate and inaccurate.”
The Waitangi Tribunal is conducting its own investigation into Oranga Tamariki and will eventually publish a report.
This week’s events followed a scathing report by Commissioner for Children Andrew Becroft, who called for a transfer of power to the Maori.
Prime Minister Jacinda Ardern indicated that the government would not go that far. Taking the children out involved a “significant use of power” and therefore was up to the state, he said.
Parliament opened Thursday with Ardern saying that the government’s top priorities were keeping New Zealanders safe from Covid-19 and continuing the economic recovery. It was followed closely by child poverty, climate change and homelessness.
The two new Maori Party MPs, co-leaders Rawiri Waititi and Debbie Ngarewa-Packer, withdrew after President Trevor Mallard shut down Waititi’s attempt to raise a point of order on speech rights.
Maori Party co-leaders Rawiri Waititi and Debbie Ngarewa-Packer left Parliament in protest at the denial of the right to speak.
Photo: RNZ / Dom Thomas
According to the rules, the leaders of parties with more than six deputies have 30 minutes and smaller parties only have a chance if there is time before the postponement.
Mallard later said that he intended to call them to talk, but by then they were gone.
Waititi complained of “the tyranny of the Pakeha majority,” a line that attracted more media attention than he probably would have received had he spoken.
On a lighter note, Green Party co-leader James Shaw asked Mallard to consider removing the tie rule from the dress code for male MPs.
Green Party co-leader James Shaw is eager to ditch the tie.
Photo: RNZ / Samuel Rillstone
Mallard said Control I would seek the opinion of the deputies in this regard. He hated ties, but in his current position he would continue to wear them no matter the outcome.
The good news this week was that New Zealand is the best country in the world to be in during the Covid-19 era, according to the new Bloomberg Covid Resilience ranking.
The ratings are based on how countries have handled the virus and the levels of disruption in business and society.
New Zealand Herald reported that the survey ranked 53 countries with New Zealand scoring the highest at 85.4, followed by Japan at 85, Taiwan at 82.9 and South Korea at 82.3.
Mexico was the worst with 37.6.
* Peter Wilson is a life member of the Press Gallery of Parliament and served 22 years as a political editor for NZPA and seven as head of the parliamentary office for NZ Newswire.
