David Seymour suggests government should consider requiring the RBNZ's Monetary Policy Committee to target asset price inflation

Michael Reddell casts a sidelight on this aspect of the RBNZ's mandate. Just let's say he's skeptical.....

Seymour gets it. And that's why he's getting my vote.

“It’s a plan we’re holding with very light hands. I think there’s a serious monetary policy debate to be had. Thankfully we have interest.co.nz to lead it,” he said.

Did you just slip that in or is that for real.. kudos to you if he did!

If inflation targeting is introduced while house prices are high it may have the perverse effect of keeping them high.

I hope Seymour would be mindful of that.

Finally some politician who gets that there is a problem, ready to highlight the damage caused by this reckless and one-sided RBNZ behaviour. I hope that other commentators and media will have the balls to do it as well, and expose this Ponzi scheme, inflated by the reckless RBNZ. Bravo David - he was possibly one of the last politicians I would have expected to raise this point.
The sad thing is that the major parties do not seem to care about this issue; they just don't want to rock the boat and, and in their shortsightedness, they pretend that the irresponsible actions by the RBNZ will not have serious structural long term damaging effects - they only care about the next elections.

ACT was co-founded by a Labour politician ( Douglas) and headed for quite a while by another (Prebble).
Maybe a Labour + ACT coalition is something to contemplate? A prodigal sons moment, so to speak.
(Yes, I know - bizarre thought. But it's late Friday arvo; when all the best ideas come out! Voila - David Seymour's)

I just don't understand how it could be implemented. Any thoughts?

We've been falsely lead to believe there has been no inflation for the last few decades, yet if you look at say, M3, then that perhaps is far from true. So do we then come clean with ourselves and say we've been living double lives...actually there was inflation (just not 'consumption'), but we just decided to not measure it.

It would require a new rule book. Be interesting to see what the intelligent folk here at interest think about how this could be introduced without completely destroying 'the system'.

Assistant Governor Hawkesby told Bloomberg that the RBNZ was thinking the same way as the Fed and would likely embrace a period of inflation above 2%. - source

In January of this year, the Federal Reserve – maybe looking ahead? – discussed some of these Japan, err, lessons.

"First, the Japanese experience shows that an announcement of a higher inflation target does not guarantee that inflation will increase to the new target level, even if the announcement is accompanied by a historically unprecedented degree of monetary accommodation. One could argue that the BOJ could have provided more accommodative monetary policy by even more aggressive asset purchase programs, interest rates at more negative levels, and better communication strategies. However, although such additional actions might have helped raise inflation to the new target level, it is highly uncertain whether these additional actions would have led to substantially higher inflation in Japan. In particular, there is a high degree of uncertainty regarding the effectiveness of asset purchase programs, especially when the size of the central bank’s balance sheet is already large, as well as regarding the effectiveness of negative interest rate policy…"

"Thus, in thinking about whether to raise the inflation target to a certain level, central banks need to take into account whether they are able to raise inflation to the new target level. If a new inflation target is too ambitious, and the central bank fails to attain it, the central bank may lose its credibility, which may render less effective any other policies it pursues."

Hear that, Jay? From your own central bank’s research. Bloomberg? CNBC? Anyone out there in the financial media? Bond Kings? Bueller?

Here’s one written by and for the Bank of Japan in July 2017 which attempted to explain why after three years of QQE plus 2%, the “irresponsible money printing” hadn’t achieved much (or anything).

"Specifically, we provide empirical evidence for what factors caused the actual CPI inflation rate to fall short of the BOJ’s original forecast made in April 2013, by using historical decomposition technique of simple VAR analysis. The empirical results show that among the deviation of the CPI inflation rate for fiscal 2015 from the original forecast of minus 1.9 percentage points – the difference between the forecast of 1.9 percent and the actual result of 0.0 percent – about 50 percent (minus 1.0 percentage points) can be attributed to the unexpected decline in oil prices. A little more than 10 percent (minus 0.3 percentage points) can be explained by the unexpected slump in output gap and a little more than 30 percent (minus 0.7 percentage points) by inflation-specific negative shocks."

Yeah, to start with, a full 100% miss. Supposed to have been one point nine and inflation in 2015 had turned out instead all of zero.

Again, it’s not really about just inflation. Even taking out each of the recessionary declines, QE’s – particularly QQE – come up short in every possible respect:....Link

For the love of all that's holy, this is not an RBNZ issue. No central bank has an asset price target, that's lunacy. This is a tax issue, NZ is the most undertaxed property market in the world - no stamp duty, no capital gains, no land tax. Building costs are also way too high - council regulation, virtual monopoly on supplies etc etc. Nothing to do with investors.

Pillorying the RBNZ is the the act of the economically stunted. Capital gains tax on investment property's is long overdue, even a land tax for investment properties has merit. But this won't bring the cost of housing down much, if at all.

lol Seymour is just having a dig. He knows his idea is antithetical to the modus operandi of the RBNZ .. pertaining to their desired direction for house prices.

he's pretty funny .. a frank statement would be; the RBNZ should increase interest-rates, forcing mortgage holders and investors to sell property on mass - flooding the market, while increasing residential building. Mortgage holders on mass will face the consequences of their exorbitant loans and the RBNZ's past, artificially held low interest-rates.

But yeah, Seymour is funny .. lol :)

Seymour just dreaming, it's by purpose in the first place anyway to exclude the inflation of land & house price from CPI here in NZ. But hey dream is free - The best we could do as 5mil team is to be kind with 'RBNZ expectation assumptions', let's do this - let's keep moving - the rest of interconnected economic world can choose to be in trouble, NZ is unique - we've got the opportunity NOT to acknowledge it, this is the chance of life time to buy RE, it's a clear signs by authorities - they won't allow any downward correction in 'NZ Economy'

RBNZ under spotlight.

Oh, is Mr Seymour saying that we need to revisit the decision to redefine the inflation measure used by the Reserve Bank for its target range to remove inconvenient things like asset inflation?

A move undertaken to make Dr Brash look good, and to pretend the neoliberal monetary policy approach had some merit.

But, I thought RBNZ were already targeting higher house prices? The higher the better.

Seriously, it's supposed to make homeowners feel better and go out and borrow and spend more. Which is good for us all, apparently. We just have to go on borrowing and spending more and more and more until everyone is happy. It's a popular delusion in their world.

Encouraging productive investment is so last century. We can all be wealthy by borrowing forever.

The problem is that at some point the cycle turns and they lose control of interest rates. They are nearer to that point than they realise. It is all built on trust and they are very close to losing it. These things are non-linear complex systems, sometimes they are resilient to changes and sometimes they are on a hair trigger.

I think what he is saying, is that it is easy for the inflation target to be met when you have a vent as big as the housing market that you influence but have no responsibility for.

If they had to, somehow, factor that in, then as a total system we would have more equality, and more discretionary income to be spent/invested on all those things we should be as individuals be in control of, rather than what more and more people are becoming, ie reliant on the Govt.