Finance Minister Bill English gets it – the government shouldn’t be one of the risks businesses have to manage:
. . . “Governments need to create an environment of stability and good incentives for [businesses] to grow the economy. Businesses need confidence the rules will not shift and the Government is not one of the risks they have to manage,” English said.
It was also important for the Government to run a counter-cyclical fiscal policy which, right now, meant running surpluses, paying down debt, and limiting future initiatives in spending and tax cuts to what would not push interest rates higher than they need be.
Keeping a rein on its own spending is a far better government strategy for keeping pressure off interest rates than meddling with the Reserve Bank Act and Kiwisaver payments which Labour is proposing.
What had driven mortgage rates over 10 per cent on the eve of the last recession was the combination of runaway government spending and runaway house prices.
There was no single answer to “ridiculously expensive” house prices, he said, especially as councils made many of the decisions about land availability and other regulatory imposts.
“They need to understand that decisions planners in Auckland make about the minimum size of balconies will affect returns to a cray fisherman off Fiordland.” . . .
Steep increases in property prices are primarily a function of supply not keeping up with demand.
Council policies and nit-picky actions by planners over minor details slow new builds.
The housing price issue isn’t a national one.
The problem is mostly an Auckland and Christchurch one but by putting pressure on interest rates it affects the whole of the country.
Council there have a big role to play in solving that by making it much easier to increase the supply.
Meanwhile the government must continue to play its part by keeping a tight rein on its spending.