Shadow treasurer says the scheme will "add even more pressure" to housing market
The National Party has pushed back on the Reserve Bank of New Zealand’s (RBNZ) plan to launch its Funding for Lending programme (FLP) in December.
The FLP, which was announced by the central bank on Wednesday, aims to provide retail banks with funding to allow them to lower their interest rates for consumers. In a recent Reuters poll, economists said that the FLP could be key to the RBNZ bringing the OCR down into negative territory next year.
However, shadow treasurer Andrew Bayly said that the scheme will only “add even more pressure to an already stretched housing market.”
Read more: Mortgage rates could drop further with negative OCR next year
“Rapidly rising house prices are a serious concern for families struggling to buy their first home,” said Bayly. “In announcing the Funding for Lending scheme, we are surprised the Reserve Bank has chosen not to target the lending to more productive areas of the economy.”
According to Bayly, the government should instead look to fix what he called the “fundamental problem of the housing market” – a lack of housing supply.
“New Zealand’s planning rules are in serious need of reform – house prices rising at such rapid rates during a recession is simply the latest consequence of a broken planning system,” said Bayly. “House prices have increased 29% over the last three years while the social housing waiting list has increased more than three-fold. Low interest rates and the Reserve Bank’s money printing are simply adding fuel to the fire of New Zealand’s broken housing market.”
“On one hand, the Reserve Bank is adding fuel to the fire of the housing market with its accommodating monetary policy,” he said. “And on the other hand, the Reserve Bank is trying to cool the housing market down by announcing Loan to Value ratios will come into force early next year. The government must ask serious questions of the Reserve Bank and the coherence of their approach.”
