Govt’s housing failure hurting the rest of the economy

The Government’s failure to fix Auckland’s broken housing market has forced the Reserve Bank to keep the Official Cash Rate (OCR) higher than normal hurting exporters and jobs, the Green Party said today.

The Reserve Bank kept the OCR unchanged today at 2.25 percent despite economic conditions that favour further cuts. The Bank cited high Auckland house prices and a need for additional housing supply there. “Housing market pressures are building in some other regions,” it added.

“National’s failure to fix the Auckland housing market is forcing the Reserve Bank to keep interest rates higher, hurting ordinary families, exporters, and jobs,” Green Party finance spokesperson Julie Anne Genter said.

“The Bank clearly blamed runaway Auckland house prices and the lack of adequate housing supply as one of the key reasons for its decision to keep the OCR unchanged today.

“National needs to introduce strong measures that will contain house price inflation in Auckland instead of leaving it all up to the Reserve Bank to manage with one tool — interest rates.

“Higher interest rates are keeping the New Zealand dollar higher, suppressing exports and contributing to the largest annual trade deficit since April 2009.

“New Zealand households and businesses will benefit from interest rate cuts, but lower rates will mean higher risks of house prices inflating further.

“The responsible policy from Government would be a comprehensive capital gains tax (excluding the family home) to remove the unfair tax incentive to invest in property. A ban of foreign buyers would also help reduce excess demand for Auckland houses.

“If the Government is serious about dealing with Auckland supply constraints, it should be building more homes, especially affordable homes to help first home buyers rather than property investors.

“By addressing the Auckland housing affordability crisis, the Government can safely reduce the cost of borrowing to help businesses and all those with mortgages or looking to get into their first home,” Ms Genter said.

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