Housing crisis holds up interest rate cuts

The housing crisis that National still wants to deny is stifling the New Zealand economy, says Labour’s Finance Spokesperson Grant Robertson.

“The latest Consumers Price Index shows that all prices excluding housing and household utilities decreased 0.5 per cent – meaning that the New Zealand economy saw deflation outside of property.

“The Reserve Bank should be acting to stimulate the economy but that is impossible with New Zealand’s runaway housing market. Graeme Wheeler has repeatedly warned National to do something to deliver additional infrastructure spending, and to reduce housing market pressures but the Government has failed to act.

"The Reserve Bank itself is also hesitating from implementing tighter controls on speculators. All of this is adding up to a housing market that is out of control and unsustainable.

“National’s inactivity over housing has meant that the Reserve Bank can’t cut interest rates and this is stifling potential growth in the economy. Importantly, it also means that Kiwis are having to pay more for their mortgages then they should – homeowners are paying the price of National’s inability to tackle the housing crisis.

"There is an alternative to the current inaction. Labour’s comprehensive housing package would deliver an additional 100,000 affordable homes and crack down on speculators to address the out of control housing market.  

“High interest rates are also pushing up the value of the New Zealand dollar, making life more difficult for hard pressed New Zealand exporters. It also makes imports cheaper - exacerbating deflationary pressures. The housing crisis is having a negative effect across the real economy.

“Inflation has now been below the 2 per cent target since the end of 2011. Clearly the current system is not working and there is an urgent need for a review of the current approach to monetary policy,” says Grant Robertson.