Additional Measures on Housing is the Right Move
Rising house prices continue to add financial stability risk to our economy, damage working families’ ability to access affordable housing and tie the Reserve Bank of New Zealand’s (RBNZ) hands to act on our rising and overvalued currency, say the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive Dieter Adam says, “Housing pressures are becoming an increasing issue for businesses, including manufacturers, particularly where skilled labour is in short supply. This presents a risk to the competitiveness of businesses, and manufacturers in particular in Auckland, and we are seeing house price inflation spread to other centres. People are struggling to have an acceptable standard of living with constantly rising housing costs. Wages are rising, but they can’t keep up with this excessive level of housing inflation, particularly where New Zealand has relatively high labour costs compared to international competitors to start with.” says Dieter.
“We have reports from our members of employees wanting to move to areas where cost of living and housing is lower – not to mention less time spent in increasing traffic travelling to work. We need affordable housing that is accessible from places of work and public transport.
“We hope to hear a plan for additional action from the RBNZ to curb investor lending and ensure loans are well funded to protect against building financial stability risks. In addition to the potential expansion of existing LVR limits, there are a number of other tools the RBNZ could implement, many of which have been used in other OECD countries. We can’t allow inaction on housing stop the RBNZ from acting on continued low inflation and a high exchange rate damaging our ability to earn export income.
“Let’s not forget, however, in addition to supply there are fundamental drivers on the demand side. There is a need to tackle the underlying imbalance of economic and tax incentives in the housing sector that are firmly the responsibility of the government. Over-time, more balanced tax incentives could help encourage productive investment in areas that can really improve our productivity and future, rather than pushing up the price of existing assets.
“The Government’s recent announcement to address the supply side through making additional infrastructure funds available to Councils is a step in the right direction, but alone it will not address the root causes of this rampant inflation of house prices. It is simply neither fair nor, as recent experience shows, effective in the long term, to expect the Reserve Bank alone to solve a problem that has been caused by a persistent lack of action by government and can ultimately only be solved by government." said Dieter.