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Housing crisis drives household debt to record levels

The Finance Minister must be woken from his slumber by Westpac’s report today that says house prices have largely driven household debt to record levels and are rising at a pace faster than other developed economies, says Labour’s Finance spokesperson Grant Robertson.

“The record household debt is ‘likely to provide a brake on longer-term growth and means that we are more vulnerable to unfavourable changes in economic conditions’, according to Westpac.

“This should be of real concern to the Finance Minister. If his government doesn’t act to rein in house prices, growth will be stifled and any global economic downturn will hit us hard.

“As Westpac’s senior economist Satish Ranchhod points out, ‘increases in debt can’t boost growth indefinitely’ and there are ‘red flags’ on the global horizon.

“This warning comes on top of concerns expressed by the Reserve Bank on the financial risks of the housing bubble.

“Owning your own home is part of the Kiwi DNA. So until prices are reined in, debt will continue to grow. No amount of piecemeal, ad hoc policies or jaw-boning from the Prime Minister or Reserve Bank will fix this.

“The Reserve Bank has already said it’s the Government’s job to fix this. There’s no one else for the Government to blame. It’s time to get this fixed.

“National has already adopted one part of Labour’s comprehensive housing plan. The only solution is for the Government to take the whole plan, including building 100,000 affordable homes, cracking down on speculators and launching an affordable housing authority to get homes built,” says Grant Robertson.