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English worried about return to borrow and spend housing boom

English worried about return to borrow and spend housing boom

Finance Minister Bill English is concerned about a return to borrowing and spending on housing, particularly with a high exchange rate that was hurting exporters, NZHerald reported. English said that in the long run, the economy needed to shift away from borrowing and spending and that a return to this "can't last." English also said tax reform was needed to encourage investment and discourage spending on housing and consumption. "There is some evidence at the moment that the recovery could consist of a pick up in housing," English said. An Infometrics report released yesterday forecast national house prices would rise 24% over the next three years, sparking a large debate on interest.co.nz. "Now that's more of the problem than we had before and it would be a concern particularly if it goes with a high exchange rate that punishes our exporters," English was reported as saying. "If we go back to more borrowing for houses and more spending then that can't last."

"The tax system may be one way of tilting the playing field but we've yet to see whether that would work and that's what the officials are away working on," he said. "In the long run the economy needs to shift away from spending and borrowing on housing to more exporting. The signs at the moment are that it's not making the shift that we would want to see, so we need to look at whether there's any policy mix that might make the right shift." English said the government would have to be convinced about significant change, "but clearly there are some lessons from our last economic boom that we don't want to repeat." "We can only look at the mix of taxes and simplifying taxes and changing the mix. To do anything significant you'd need a pretty strong case for change and we haven't seen that yet." English said an increase in GST would hurt poorer people most. "The official advice is pretty straightforward. If you want to stop people spending more, put GST up, but of course that has a big impact on people, particularly on lower incomes, so it's not a straightforward issue."

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