Tuesday, 9 February 2021

Reserve Bank patch-up effort inevitable


“Reintroducing loan-to-value ratios (LVR) was as inevitable a move from the Reserve Bank as night following day, but it won’t make much difference to the fundamental reasons house prices continue to rise disproportionately to other asset classes,” says ACT Leader David Seymour.

“That house prices would rise as a result of the Reserve Bank printing money and suspending LVRs with the onset of the Covid-19 was obvious to anyone with a basic understanding of economics.

“Unfortunately that didn’t include the Prime Minister, who expressed surprise in early November that records were being set for home lending, astonishingly saying no one could have predicted it.

“But of course we know the Reserve Bank did predict printing money would increase house prices in its early advice to the Government on economic stimulus options for responding to coronavirus.

“That it proceeded to print so much money and in turn suspended LVRs is something it’s clearly now regretting.

“What needs to be remembered here is that house price inflation will only stabilise once proper measures are taken to improve supply.

“Instead the Government has signalled it will attempt further demand side tweaks and schemes that are unlikely to make any real difference.

“Meanwhile all signs are that the areas that can deliver lasting change, RMA and infrastructure funding reform, won’t be as swift nor as thorough as they need to be so that future generations can fulfill their dreams of home ownership.”

ENDS