Property Institute chief executive Ashley Church called today for Finance Minister Steven Joyce to renegotiate the Government’s target agreements with the Reserve Bank because of bank governor Graeme Wheeler’s convenient retirement 3 days after the election in September.
Mr Wheeler said he wouldn’t seek a second 5-year term. Deputy governor Graeme Spencer, who’s also retiring, will hang in as acting governor for 6 months after Mr Wheeler leaves.
Mr Church has been a strong critic of Reserve Bank policy for 2 years, and said Mr Wheeler’s resignation gave the Government a timely opportunity to review that policy & its effect on the housing market. He said many of the bank’s decisions had damaged the market and had slowed construction of new homes to a rate well short of catching up with demand.
“While the Government, the Auckland Council & the private sector have all been focused on addressing the supply issue in Auckland, the Reserve Bank has been unashamedly at odds with the market in its attempt to artificially cool demand. Sadly, it’s failed, and has only served to make the problems in Auckland even worse.”
Mr Church said he would like to see the Government add a ‘housing market supply’ clause to its contract with the Reserve Bank, which would require the bank to consider the effect its policies would have on overall supply: “If such a policy had been in place 2 years ago, the disastrous LVR (loan:value ratio) restrictions would have been much more carefully considered – and there would be no talk of debt:income limits on lending.”
Mr Church said he would also like to see the Government move to immediately modify existing Reserve Bank policy, particularly the LVR restrictions on first-homebuyers: “The decision to put LVR restrictions on first-homebuyers has been directly responsible for stopping thousands of Kiwis from buying a first home – and the longer they stay in place the worse the situation gets. We don’t have the luxury of waiting till September till those restrictions go – they need to be removed right now.”
Related story: On the move, February 2017, Wheeler sticks to one term at Reserve Bank, Spencer to fill in post-election
Attribution: Institute release.