The decision to cut the Official Cash Rate today is the right one but will add fuel to Auckland’s rapidly rising house prices unless central government acts swiftly and smartly, the Green Party said today.
The Reserve Bank Governor reduced the Official Cash Rate (OCR) by 25 basis points to 3.25 percent today citing low and falling inflation, an overvalued exchange rate, and subdued wage inflation expectations as the reasons for the cut.
“Graeme Wheeler has finally done the right thing for New Zealand’s productive economy by cutting the Official Cash Rate – a move which will help boost the export and manufacturing sectors and create valuable jobs,” Green Party finance spokesperson Dr Russel Norman said.
“Better late than never, however, the ball is now squarely back in the National Government’s court to control the Auckland housing asset bubble.
“By lowering the OCR and signalling further easing in the future, the Reserve Bank is making it cheaper to borrow for housing, which effectively pushes the responsibility of addressing the Auckland housing crisis back to central Government.
“The Reserve Bank has already used some of the limited tools at its disposal to try to dampen the demand from domestic investors, but it doesn’t have the means to stop non-resident foreign buyers from continuing to cash in on Auckland’s overcooked housing market – that’s the Government’s job.
“Offshore demand for Auckland housing is a very deep bucket.
“And if National’s weak capital gains tax doesn’t work as intended, and soon, more measures will be needed to stop the Auckland housing bubble from inflating further.
“On the housing supply side, National’s desperate attempt to try to outrun demand with more sprawl and motorways won’t work – it is slow, energy intensive, expensive, and needs large taxpayer and ratepayer subsidies. The smarter alternative –, quality compact urban form with good public transport – is much faster and cheaper and helps make Auckland the liveable international city we all need it to be.
“It will also be interesting to see whether all the banks pass on today’s rate cut to their mortgage holders and businesses.”