By Bernard Hickey
Finance Minister Bill English has ramped up his attacks on town planners who he said restricted the growth of housing supply, arguing they would be blamed if the latest surge in demand from housing migration led to another boom in house prices that inflated the exchange rate and interest rates.
"Demand for housing is rising and a turnaround in migration flows is likely to push demand even higher," English said in Parliamentary question time in answer to a question from fellow National MP David Bennett.
"Unfortunately, our planning rules and attitudes within councils and to some extent government have restricted the supply of new houses that can be built in response to this new demand," English said.
"Rapid increases in house prices are damaging for the economy because it puts pressure through a high exchange rate on our export sector," he said.
"That's a challenge for government -- because it puts pressure on government to fund the affordability gap for households that can't afford rising mortgages -- and it's unfair on individuals who are trying to enter the housing market," he said.
"This is why the Government has passed legislation -- opposed by Labour -- to streamline planning rules and is working with the Auckland and Christchurch Councils to significantly increase the supply of housing over the next two or three years so that low and middle income families can benefit from home ownership so we can avoid high interest rates and have a healthy export sector."
English pointed to a doubling of building consents since 2011 to their highest levels since 2007.
"But if we're going to avoid significant ongoing increases in house prices and therefore even higher interest rates, we need councils to make more positive decisions for more housing supply," he said.
Green Co-Leader Russel Norman then asked English if the 20% rise in electricity prices seen over the last five years and the 20% increase in house prices in Auckland was putting pressure on the Reserve Bank to increase interest rates.
"The rules around housing have been made by councils and it's important we work with councils so they understand that when they're making rules about a denser city or a more liveable city or are anti-urban sprawl those decisions impact the whole economy, and particularly they can have a damaging impact on our export sector, who council planners historically don't think about very much," English said in reply.
"We all have a job to control government spending, to make our electricity market more competitive, to work with councils for more housing supply. If we do our jobs then New Zealanders will enjoy lower interest rates than they otherwise would," he said.
Electricity market competition?
Norman then asked if the 20% rise in electricity prices was a sign of a competitive electricity market.
English replied that power prices had risen half as much as when Labour was in Government. He said part of the reason for the increase was to pay for an increase in investment in Transpower's distribution network "and now the effect of that investment is flowing through into prices."
"But the market is more competitive. The last thing someone needs is someone coming in, destroying a competitive market, putting us back 20 years to where I think Brazil is and us having to go and learn all the lessons again.
Norman then asked if the market was competitive when demand fell, but prices rose.
"In the long run, if demand keeps falling then prices will eventually come in line with that, but I can tell you the market is much better at sorting that out than that member ever would be if he became the Minister of Energy because his policy is all about Russel Norman setting the price. A better way to do it is people knocking on doors from electricity companies all over New Zealand offering big discounts," English said.
Norman then went on to ask Economic Development Minister Steven Joyce, standing in for Energy Minister Simon Bridges, about the NZ$360 per household rise in power prices seen since National was elected. Here is the full exchange.
"Thanks to the Government's reforms of 2010, the system is more competitive than it has ever been and substantial savings are available for consumers who choose to shop around," Joyce said.
Labour Energy Spokesman David Shearer then brandished letters from power retailers advising of price increases up to 14%, and challenged Joyce on whether this was too high.
"Nobody likes it when prices go up. That's a given, but the prices of electricity have gone up less than the actual real after tax wages of New Zealanders, which have gone up 23.4% since September 2008," Joyce said.
"Nobody likes it when prices go up and the way to deal with that is more competition and that is what this government is encouraging," he said, adding those sending their letters to Shearer should instead go to WhatsMyNumber.org.nz to look at switching.
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