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Low inflation hides cost of housing crisis

Low inflation in the Consumer Price Index (CPI) hides the way the housing crisis is hitting peoples’ pockets and distorting our economy, the Green Party said today.

The CPI showed that inflation was 0.2 percent in the March 2016 quarter and 0.4 percent for the year to March 2016, but housing costs rose 3 percent in the year. MBIE data shows rents across the Auckland region rose on average 5.2 percent in the last 12 months.

“Low oil prices mean the CPI is hiding the fact the cost of housing, especially rental housing in Auckland, is rising much faster than wages and other prices,” Green Party finance spokesperson Julie Anne Genter said.

“If your rent is going up five percent but you’re one of the almost 50 percent of New Zealanders who didn’t get a pay rise last year, overall low inflation isn’t going to help you.

“Last week new data showed that median Auckland house prices are now almost ten times the median household income, so it’s clear that housing costs are skyrocketing for people looking to buy their first home.

“Low inflation makes it more likely that the Reserve Bank will cut the OCR again soon, which could just pour more fuel on the housing crisis fire.

“National’s failure to fix the housing crisis means we’re now stuck between a rock and a hard place: lower interest rates could help boost our productive economy, but could also cause even more housing cost problems.

"We urgently need stronger action to fix the housing crisis including a Government-led home-building programme, quality mid-rise apartments around major transport routes, and measures to stop speculation like a comprehensive capital gains tax (excluding the family home) and restrictions on overseas buyers,” Ms Genter said.