Central bank

Reserve Bank told off for micromanaging mortgage market – and failing

The?Reserve Bank copped a kicking from treasury for their failed meddling in the mortgage market.

Not only was it unnecessary it also failed.

The Reserve Bank has been told to stick to its knitting by the Treasury, with officials warning that rules on mortgage borrowing need to be within its mandate.

In documents released on Thursday evening, Treasury officials also warned that the original loan to value restrictions put in place by the Reserve Bank may have led to more activity by property investors. It follows numerous claims that the rules have hurt first time buyers.

In a briefing for Secretary to the Treasury Gabriel Makhlouf, officials said they agreed with the Reserve Bank that a pick-up on the Auckland housing market “could potentially pose a threat to financial stability” in the coming years.

“However, Treasury has been engaging with the RBNZ to suggest that although we accept that house price changes can have macroeconomic implications, the RBNZ’s mandate is focused on promoting financial stability, and therefore the policy proposals should be reframed to focus more clearly on reducing systemic risk rather than asset prices.”

The comments appear to suggest the Reserve Bank is being warned that it may be overstepping its role over financial stability, a claim made in recent months by Michael Reddell, a senior adviser to the bank who was made redundant earlier this year. ? Read more »

Twyford ignores Labour’s own history with interest rates

Phil Twyford is trying to blame interest rates for the so-called housing crisis.

The average Kiwi household is $250 a year worse off because the Auckland housing boom has kept interest rates high, Labour has claimed.

With the Reserve Bank due to revise its 3.5 per cent official cash rate (OCR) on Thursday, Labour housing spokesman Phil Twyford has issued figures showing an across the board 0.5 cut would provide an immediate $725 million boost.

He says the analysis ? which he admits is an assumption, given all interest rates would not immediately respond in a uniform way ? reinforces his criticism of National?s ?abject failure? to control soaring prices or build enough affordable housing.

?This is money that is currently going to offshore lenders. The whole country ? households, consumers and businesses ? are paying the price of the Government?s failure to fix the Auckland housing crisis,? Twyford said.

Which kind of ignores Labour’s recent history on interest rates.

David Farrar takes a break from arts reviews to point out the hypocrisy of Twyford’s statements.

Let?s have a look at the history of the OCR:

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Yeah that 3.5% is just killing businesses and households. Labour never had it below 4.5% and even had it above 8% until they crashed the economy into recession (before the GFC struck).

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