By Bernard Hickey
In another sign of growing tensions between the Government and the Reserve Bank, Prime Minister John Key has responded to the bank's call for a 'team effort' to address housing imbalances and its refusal to urgently tighten Loan to Value Ratio (LVR) rules.
Key repeated comments from Tuesday in which he told the Reserve Bank to 'get on with it' when referring to plans to tighten LVR rules for investors in Auckland and beyond.
Key's comments on Friday followed a speech by Deputy Governor Grant Spencer on Thursday night that held back from an urgent introduction of new LVR rules and instead called on the Government to review tax incentives for investors and suggested a review of migration settings. See more in David Hargreaves' article on the speech.
Key was speaking in a live chat on Stuff.co.nz on Friday about the housing crisis/challenge and doubled down on his implied criticism of the bank.
"I stand by what I said, I think they should get on with it," Key said.
"The Bank's making the point that it's a team effort, but the Government is doing an enormous amount, and local government is as well," he said.
"Actually we're all in this together. We're not critical of the bank, but we're just simply saying it's not like they don't understand LVR restrictions," he said.
"We gave them that tool in their toolbox. They know exactly how to do it and they can do it very quickly."
Migration review rejected
Key also rebuffed the Reserve Bank's suggestion of a review of the skill levels in the migration settings, given concerns about both the effects on the housing market and on skill levels more generally due to high levels of temporary and student migration. See more on Treasury's concerns about low skilled migration in this article.
Key said the Government had already taken 50 categories off the skills shortage list for migration.
"We don't just let anyone come," Key said.
He said overseas students and those on working holidays were renting rather than buying houses.
"The single biggest changes are Kiwis either not leaving, or returning, or Aussies coming over. It's actually a sign of success in the economy," he said.
Key said skilled migrants "make the waka go faster" in areas where they were needed.
Risk of short-term surge
Earlier Economic Development Minister Steven Joyce told RNZ the Prime Minister was right to point out to the Reserve Bank that signalling a tightening a long time before the actual tightening risked encouraging a short-term surge of investors racing to get in before the rules changed.
"The difficulty with talking about stuff and not doing it is that you can actually provide a further impetus to the market in the interim," Joyce said, pointing to talk there had been a rush before the second round of LVR rules targeting Auckland investors in November last year.
"It's difficult because you can't change these things overnight, but it was entirely fair for the Prime Minister to say it would be good to get on with it if we're going to do it," he said.
"What the Prime Minister said on Tuesday was if you spend too much time saying this might happen by the end of the year then somebody who's thinking about buying a property might think I better get in before the end of the year, which can actually exacerbate short term pressures over time."
Joyce also rejected outright Spencer's suggestion of a review of migration settings.
Asked if the Government would review its settings, he said: "No. He said it should be fine-tuned and that's what we do all the time."
87 Comments
Yes, I wonder who one should believe...an intelligent and impartial RB Governor, or politicians with a vested interest in keeping on pumping the migration ponzi?
Migration is clearly having an impact, and whilst Key is right up to a point about the movement of kiwis being a key factor and impossible to control, that doesn't mean to say they can't cut back on some of the non-kiwi migration.
He's just being disingenuous, at best...
The reserve bank are the qualified experts who have worked in the job for years, and it shows. Politicians are only elected in, and don't need any qualifications. So I know whose advice I would trust more. National don't want this dragging on for too long, so they need to get on with it. In the last 3 years over 100,000 immigrants have come in to NZ, and hey need housing, and we haven't been building enough houses for even NZs own natural population growth . I mean is who making these decisions. It is going to be like hot potato, some people are going to be caught out, but who?
RB governor knows that that it is the government responsibility to curb housing speculation and solve crisis though RBNZ can only help a little and that PM is trying to pass the blame as wants to do nothing and may be for this reason is putting government in a dock to force them to act.
Together the problem can be solved and for that JK has to act followed by RB and all other agencies.
It is clear to us but when will National rise to the occasion and do something is a golden question
You're in an out of control plane. There's a guy onboard who claims to be a leader - he told me this while swanning around the Air NZ business lounge before the flight. There's another guy who told me he sets the safety rules to prevent planes from crashing. During the flight the plane starts climbing dangerously high. Everyone knows if it goes too high it will stall and come crashing down. The 'leader' and the 'safety guy' know what's happening and what the outcome will be. They're in first class and closest to the cockpit. Yet they do nothing when they should go up front and take the controls. They've drunk too much expensive champagne and combined with the altitude they're at, they appear to have hypoxia. So instead of doing anything useful, they just parade around the business class section taking selfies with sleeping passengers. The plane climbs higher and stalls. It crashes to earth. Economy class never knew what hit them. They were told everything was under control and were even a bit excited about the rapid rise and spectacular view from such a height. They never knew the trouble they were in because the leader said everything was under control and kept smiling while taking selfies. They were lied to.
Yes I do agree with you bigblue; though that's only part of the problem. The real problem is Non-Resident Investors who we know make up around 40% of the Auckland property market. This is the area that needs to be slowed down.
Ironically Key did throw on the property breaks without fully realising it last October, with the new IRD registering requirements for Investors. That halted the Auckland housing market for four months and the Auckland housing market actually started to fall a bit by - 8% until the registration backlog was cleared.
Restricting Local Investors will help to slow down the provinces but Auckland will probably keep surfing along due to the non-resident investors.
Just watched Key on One News - what an arrogant piece of work he has become - surely his popularity in the polls will plummet. Comes across as a complete smart prick these days - perhaps he is starting to realise his days are numbered. JKExit coming soon. Couldn't believe him in the Stuff interview this morning where talks about confidence in the economy with lots of people ordering new runabout boats when on the other hand we have the worst homeless crisis and poverty problem ever.
http://i.stuff.co.nz/business/81880549/Recap-House-prices-can-t-be-fixe…
yes he's detestable now...but will his popularity plummet? I wouldn't bet on it. There's a whole bunch of 'middle nz' people (you know the type) who are doing very nicely thank you and don't give a toss beyond their own selves. I have to put up with some smug tossers at work who have made a fortune out of property. No sign of that having been based on talent, just being lucky and in the right place at the right time when they bought. It makes a mockery of our so called 'meritocracy'.
Increasingly, NZ will now have a wealth structure based on inheritance off ponzi fortune.
So much for our relatively egalitarian roots!
The RB can use its mandate and simply increase bank capital requirements to help stabilise the banking system and simultaneously reduce credit growth. Key claims housing demand doesn't need addressing and it's all about supply, but credit rationing can instantly reduce demand. Why doesn't he push the more capital option instead of LVR which has proven to have a limited shelf life?
The economy is getting better, recent business polls prove that,
With a back of the envelop scribble, the 160,000 migrants who landed in NZ in the last 3 years ( according to Spencer) injected at least $1.6B in the economy ( at $10000 each) other than the amounts released to the public from buying their houses and sections ....
The whole economy is benefiting from "immigration" in all its forms and skills, even the ones who come on the business system. How many of these people do you see in WINZ? maybe they came in big numbers too soon and choked the housing market as well as overwhelming other areas too like infrastructure and services, overall there are benefits not only problems!! Some of that extra money ( in today's world of scarce resources and business) goes to schools, health, and supporting families etc ...
Let's identify poverty and whether it is voluntary or imposed !
I say using terms like poverty and homelessness loosely doesn't help any debate, let alone a political one...
Highly Skilled by the numbers
1. Chef
2. Registered nurse aged care
3. Retail manager
4. Cafe or Restuarant manager
5. ICT support manager
6. ICT Technician
7. Software Engineer
8. Early Childhood teacher
9. University Lecturer
10. Developer Programmer
11. Registered Nurse
12. Office manager
13. Baker
14. ICT Business Analyst
15. Sales and Marketing Manager
16. Resident Medical Officer
17. Secondary School Teacher
18. Accountant (General)
19. Registered Nurse (Critical Care)
20. ICT Project Manager.
http://croakingcassandra.com/2015/09/03/occupations-of-residence-approv…
and how much of that 1.6 was chewed up by services they used, it cost NZ "New Zealand spent US$13,740 per child per year" so your 10000 does not even cover their schooling, let alone public health
maybe they all came without kids and health insurance.
if immigrants come in too create businesses and employ let in as many as you can, or if they are much needed, rocket scientist , heart surgeons sure no problem.
most of that skilled list can be trained from within, its mostly lazy policies where we import staff
"He said overseas students and those on working holidays were renting rather than buying houses".
Really? How does he know?
He changed the rules that students can work. Therefore they have income. Plus who know what money comes to them from overseas.
Foot in the door.
And ... funnily enough there has been enough observed evidence of international students buying property ... buying as proxies for the "home team" ... still ... they are buying ... not all of them ... but some of them definitely are
There was the documented case (non-anecdotal) (in NZ Herald) of a 20 yo princeling asian student who lashed out $5 million on 3 properties in Devonport in 2014
It was right there in the heavily-spun buyer tax-residence data that 39% of buyers were on temporary and student visas. Of course, he was just pulling nonsense out of his arse as expedient and hoping the public are silly, short-memoried and trusting enough to just accept it.
I listened to Key today. Clueless. He's been a very successful salesman, and it's worked well for him. Now it is starting not to work for him he has no other method. Today he continued to shovel out a lot of B.S. about the Reserve Bank and tried to sound the reasonable man. "at the end of the day".
He needs to do his own job, but doesn't know how.
Umm. People living in cars is not an RBNZ issue. Their job is to protect the banking system. If they feel they have to do some things that make life harder for FHBs so be it. FHBs are not the RBNZ's problem.
If the banks pass stress tests about whether they could handle a housing crash .. however that is done ... that's the end of it for the RBNZ. I'm surprised that they came back and talked about immigration because its not in their remit. Inflation and stability of the bank system is it for RBNZ.
It was set up as nmdependent so there would be no political control ...
That is correct Ian, it looks to me that the RBNZ is stuck with limited tools to play with , hence asked for a hand from the Gov ( in terms of immigration and taxes) to easy out their job .. but it seems as if they have been told off and to get on with their knitting ...
JK cant even remember what porkies he told yesterday, he is like that annoying sales rep that keeps coming back promising everything and delivering nothing whilst saying he will get it sorted which never happens.
only problem with government is we have to wait three years to change salespeople to get the service we want and we have to wait until enough of us are peed off for it to happen.
The RBNZ has limited tools at it's disposals. The "real" tools come from government policy - they have far more control. JK I think was hoping that the RBNZ would propose various solutions - if they didn't work it wasn't JK's fault. The RBNZ know the limits of the tools they have and hence the comment about a "team effort" - it drags the government into the equation. It is a battle between the the National government and the RBNZ - and round one appears to have gone to the RBNZ.
JK is losing the narrative.
Correct badrobot. It is government responsibilty and the problem is that crisis had become too hot to touch for anyone but quality of a good leader is to take responsibility and act and even if does not stop atleast they tried which is better than doing nothing - which current gi t is doing.
Hope our PM will make us proud of him.
Mr PM Better Late Then Never.
Given that housing is 3/4 of New Zealands economy, I would assert that it IS the RBNZ;s jub to control the price. Inflation is their madate, and inflation is running well outside their specific area of responsibility at 8%+
I have argued directly with Don Brash before, he is a lightweight. But that is the trouble with New Zealand, too many lightweights in positions of responsibility.
Couldn't agree more scarfie. The reserve bank dictates through risk weightings where banks lend. This is massively skewed towards housing. The banks are only doing what they are allowed. Key is right. there is far too much talk from wheeler and co. Jawboning, announcing restrictions in advance is dumb with such a large scale problem. They need to just get on with it. Personally I think we need someone in there that has some balls. These guys are running scared.
Haha. I am prepared to be benevolent and put it down to herd behaviour. Lightweight sometimes means that they know not what they do. A bit like the people that vote for them. Not that i am particularly political, the qualities of either persuasion of the spectrum are little different. Just calling it as it is.
The PM can point the finger at the Reserve Bank with some justification for tardiness.
But his Govt and Minister of Finance could have done a lot more to help; such as getting rid of negative gearing altogether; having a CGT on all second properties beyond the pathetic 2 year "bright line"; signalling to the Reserve Bank that they should use their powers to force the banks to be much better capitalised and to halve their leverage over a few years.He has had years.
Much easier than trying to assess borrowers' debt/income ratios.
I think we are looking at a PM angry with himself for listening to English and Brownlee, relying on wet bus ticket solutions, market forces and laissez faire; an otherwise good PM who has gambled and lost, while taking all the flak that Bill English should be taking and lashing out at the flaccid RB instead.
IRD argued for everyone guilty and having to prove it was the family home or a ten year bright line test even went down to five but national know better so slapped on a wet bus ticket of two years.
maybe they do not see themselves in power and want to be able to sell their apartments in wellington
Lets remind ourselves ...... so from 2007 to 2016 he has done absolutely zilch and now he blames the Reserve Bank ..... used car salesman ex banker.... crisis at 500k and now 500k higher on his watch in Auckland.... he is responsible the buck stops with him... he controls taxes & immigration
http://www.scoop.co.nz/stories/PA0708/S00336.htm
John Key MP
Leader of the National Party
20 August 2007
Speech to Auckland branch
New Zealand Contractors Federation
Conclusion
Over the past few years a consensus has developed in New Zealand. We are facing a severe home affordability and ownership crisis. The crisis has reached dangerous levels in recent years and looks set to get worse.
This is an issue that should concern all New Zealanders. It threatens a fundamental part of our culture, it threatens our communities and, ultimately, it threatens our economy.
The good news is that we can turn the situation around. We can deal with the fundamental issues driving the home affordability crisis. Not just with rinky-dink schemes, but with sound long-term solutions to an issue that has long-term implications for New Zealand’s economy and society.
National has a plan for doing this and we will be resolute in our commitment to the goal of ensuring more young Kiwis can aspire to buy their own home.
It’s a worthy goal and one I hope you will support us in achieving. Thank-you.
I agree with all three of you commenting so far, but JK is just the epitomy of the BAU club. On that basis he thinks he is managing the country as well as he thinks can be done. No other politician is going to step too far outside that club either. I mean the indefatigueable Iain Parker has been at labour politicians, including little, and they shy away from the truth about the matter. http://publiccreditorbust.blogspot.co.nz/p/op-eds-published-note-headin…
Yes JK is selling out the country, but what are you doing to do about it? I can say with complete assurance that voting won't help you.
exactly too much talk about what the opposition would or wouldn't do.... the opposition don't have power so they cant do anything
JK is solely responsible for this mess so the blame sits with him ... no amount of blame shifting , PR spin is going to change the fact that he has been leader for the following period and none nothing to fix the crisis.
2008
2009
2010
2011
2012
2013
2014
2015
2016
His words in 2007:
"The crisis has reached dangerous levels in recent years and looks set to get worse.This is an issue that should concern all New Zealanders. It threatens a fundamental part of our culture, it threatens our communities and, ultimately, it threatens our economy. The good news is that we can turn the situation around." http://www.scoop.co.nz/stories/PA0708/S00336.htm
WHEN EXACTLY ARE YOU GOING TO START TURNING THIS AROUND ?
0.5m was the average price in 2007 in Auckland now its nearly 1.0m .... pathetic attempt at turning things around .... has actually made the situation worse... 500k worse for Aucklanders
#JKEXIT
Blaming JK is the level of negativity surrounding the housing crisis. Why do you think immigration is boosted by returning Kiwis and Aussies flocking here. JK must be doing something right. What really needs doing and that boat is crying out loud for us to get to the boat and get rescued. The boat contains the AUP (perhaps a more intense version of the original AUP will be even more helpful and the nimbys can move to Mangawhai,Omaha or wherever there is plenty of space and live on super large lots, LVR anywhere from 50-100% for investors right now (without a friendly reminder it may be coming, unless you are joking), some clamp on foreigners buying here like in Aussie etc, etc. For the immigration bashers--where did you come from and what bank balance did you have when you boarded off the jet at Auckland airport. Get positive--it will do us all good.
First off, the BULK of immigrants are NOT returning kiwis that is a bit of b.s. from the govt you have chosen to believe. Secondly, it is what Australia is doing WRONG that is bringing them back, in a nowhere else to go kind of way, another bit of Key's b.s. And thirdly, you obviously missed the bit in the TPP where your precious government signed away our rights to do anything specific about foreign buyers.
I guess you wouldn't have gotten out and marched against it at the time choosing instead to trust them to deliver you a gold plated deal. Oh well.
I concur. Most of the negative sentiment towards JK appears to come from either the far left, or those that have missed the property wave, and/or renters. These groups have never been nationals core vote. Farmers that are struggling... That's a different story? Still can't see that group switching en mass to Labour anyway. For the rest that can see past the housing issues, nz is doing pretty well economically. Especially compared to the rest of the world which is a mess.
how wrong are you, many of us are home owners who see the damage a do nothing government is doing to a younger generation,
as we run a presidential type democracy the guy at the top calls the shots takes the rewards or criticism.
that is why JK is hammered,
as for saying only the left jumping up and down, that would be a surprise to many leaders of industry and business that are slowly starting to go public.
gee I would never call don brash, don braid, kim Campbell lefties
http://www.radionz.co.nz/news/business/304608/big-govt-house-build-'nee…
Most political leaders in the job for too long go senile and believe their own b.s...
He doesnt use the same services most of us use. I voted national last time and until labour sorts
Its shit out probably will again. I know its not right .But the big tent labour talks about really does
have some factional interests in it that scare people...
Read latest article in nzherald
http://m.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11671…
Someone should take responsibilty or blame and feel it should be the head of the country as buck stops with him and if no should resign and let someone else take the responsibilty.
Agree. But at least she has come to the party on this issue with some pretty forceful words.
The Herald is in full attack mode.
That's good, even if it's far too late.
Key won't like this. The Herald is by far the biggest newspaper in the country and it has really turned on him.
here is what the economist think of Australia's immigration policy (which is similar to NZs)
http://www.economist.com/news/leaders/21701776-points-system-would-not-…
I voted for this government but have to say the lack of leadership over housing, and other issues, is astounding. The pattern Key uses which has become tiresome is to - deny there is any issue, then when that no longer works blame others (councils, RBNZ etc), then when that doesn't work do a lot of talking but only take the action required to get it off the front page. There is a lack of willingness to deal with issues by taking any substantive or meaningful action. We need a leader and a government who don't just chase growth, but one that chases growth for the benefit of as many New Zealanders as possible. Next election I will be voting ABJK (Anybody But John Key).
We are happy but are not thinking just about ourselves but worried about homelessness and young generation as have seen so many people struggling and definitely this is not what we want. Am lucky that had bought many years back but am also worried that people who are buying the house now will be worst hit.
As bubble will burst, by how much, one can question and also when, but when it happens, now or in a year time will be disastrous unless government acts and take hold of the situation that may not end up as bad.
If the denial than why is everyone talking about it and also in media, news - if everyone is talking on a daily basis in it self means that their is a crisis and need to do something or atleast try to do something and not just sit back and blame everyone else.
Instead of asking Kiwis to exit, it has to be #JKEXIT.
When one voted did not realize that power will corrupt and make arrogant to the country.
People seem to have nothing better to do other than bitch and moan about problems in the world that will never be fixed, Don't worry about people buying houses now as it is their fault to make such a decision if they don't think carefully about what they are doing. In regards to homeless people they must of been living in a home before, so what happened evicted for not paying rent or p contamination or are they not desirable flat mates, WINZ will pay people the benefit if they actively look for work.
NZ Hreald head of business Fran o Sullivans opinion
http://m.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11671…
Everyone understood and now comming out to expose.
How long more denial. Now it is a matter of time.
Exactly and like any BANKER he is focussed on short term goals/metrics such as GDP growth with little regard to long term consequences of his policies as another government will be left to pick up the pieces...
BANKERs requires high GDP growth
- achieve this with extremely high immigration of low skilled workers
- booming housing market (39% of buyers are foreign persons (students, Temp Workers & non residents)
What are the consequences of this short term view
- GDP per Capita failing to grow at all (completely ignored)
- pressure on existing infrastructure
- pressure on house prices (completely ignored by the inflation metrics)
- Household debt growing at 8% p.a on the back of 216BN debt
#JKEXIT (we need a facebook page for this)
great video check this out
http://www.newshub.co.nz/politics/brash-politicians-to-blame-for-auckla…
People were saying that JK has to act but were ignored than media, news agencies, expertd started to say that JK has to act and are still saying but are being ignored now even RBNZ started to say JK should act but instead started argument and blame game and now one of their Don Brash is also telling govt to act but still denial.
What is wrong with govt. Is egoism and arrogence coming in the way now as am sure by now they must have realised their mistake of not doing anything or still in their own world and denial.
This is and will definitely be their downfall unless they act or may be national replaces leader to start afresh with right notes.
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