If you are struggling to get into the housing market right now, and you’re hoping that the moves by the Finance Minister this afternoon are going to help you, I’ve got bad news.
It’s probably not going to help.
Grant Robertson’s written to Reserve Bank Governor Adrian Orr, asking him to consider how the bank can help stabilise house prices. One option is to add a third criteria to its job description: not just inflation, not just employment, but now also house prices.
The reason he’s done that is because the Reserve Bank itself has driven house prices up by lowering interest rates and printing huge quantities of money to get us through Covid’s economic disruption.
Nice idea, but it’s been labelled nothing but political theatre by former Reserve Bank economist Michael Reddell.
In his opinion, it’s ‘lame’, it won’t change the Reserve Bank’s decisions and – even if they were already considering house prices when they started dropping interest rates and printing money – they would’ve done it anyway because of covid.
Really, what this tells us is that the government is starting to feel the heat over rising house prices.
Labour has got itself a potentially significant political problem here. It doesn’t have the luxury of mostly ignoring the rising house prices like the previous national government largely did.
National got away with it to some extent because their supporters are more likely to be home owners who don’t mind the house price increases.
Labour supporters, on the other hand, are more likely to be the younger ones wanting to buy a house who mind the increases very much.
Worse, still, Jacinda Ardern made a lot of promises in 2017 about fixing the housing market and spent a lot of time slamming national for the rising prices.
She said: “We believe things can be better, and under Labour they will be better. We can make home ownership possible again."
So, she can’t sit back and watch house prices rise when she promised to fix this situation
Labour will be punished a lot harder than national was if this continues too long.
Today’s PR move might buy the government a bit of time, at least it can claim it’s doing something.
But at some point unless this housing market cools down, it’s going to eventually have to actually do something.