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RBNZ's Spencer toughens call for review of migration settings; English says RBNZ doesn't have detailed understanding of tax and migration policy, and may have missed recent moves

RBNZ's Spencer toughens call for review of migration settings; English says RBNZ doesn't have detailed understanding of tax and migration policy, and may have missed recent moves

By Bernard Hickey

The Reserve Bank and the Government are increasingly at loggerheads over both migration policy and the bank's moves to introduce a third round of LVR controls by the end of the year, rather than urgently.

Deputy Governor Grant Spencer upped the ante in his speech on Thursday that firstly denied Prime Minister John Key's call to 'get on with it' on tighter LVRs and then suggested a migration review and repeated calls to remove tax incentives for property investment.

Spencer then further strengthened his call for a migration review on Friday morning as Finance Minister Bill English outright rejected the Reserve Bank's call for a migration review and told the bank to watch what the Government was doing.

The public disagreements are the strongest seen in public during this Government.

Spencer gave interviews on Friday with RNZ and NBR Radio that reinforced that the Reserve Bank would follow its own timetable for a third round of Loan to Value Ratio (LVR) restrictions. He also significantly extended the speech's two-sentence suggestion for a review of migration settings into a full call for a review.

"Given it's an important driver, we should be taking a look at that policy -- making sure we're getting the numbers and skills that Government's really targeting," Spencer told Guyon Espiner when asked about migration on Friday.

"I think it needs to be reviewed. We're running at a rate of 60,000 (per year) at present. But how many years can we continue running at a rate of 60,000 and continue to absorb that rate? It gets more and more difficult when the country doesn't have that absorbtive capacity," he said.

Spencer also pushed back on the timetable for the LVRs, where the Government clearly wants more urgent action and is worried about a big rush of investors into the market before the Reserve Bank tightens the rules.

"We do have a process to go through and, unavoidably that does take some time. Some people would like to see the wheels turning a bit faster, but they are moving, nevertheless," Spencer said.

He said there were other ways the Reserve Bank could influence the banks in a 'softer' way than hard restrictions, at least in the interim.

"We do need to talk to the banks. We want them to enter into the spirit of these things and take a responsible approach ahead of any policy move, and last year when we introduced the Auckland investor LVRs the banks did take a responsible approach," he said.

"The banks are getting more and more concerned about the risk inherent in this market so I don't think they're going to get carried away."

Later on in the day Spencer repeated the call for a migration review in even stronger terms when talking to NBR Radio.

"We think at the end of the day the physical imbalance needs to be addressed, and that's about building more houses and potentially looking at migration, in the sense that I don't think the country can sustain the rate of immigration – 60,000 plus per annum for a large number of years -- so that's the essence of it," Spencer said in the NBR Radio interview.

'Just listen to what we've said'

Key doubled down on last Tuesday's 'get on with it' said in an interview for Stuff on Friday. See more in our Friday article here.

Bill English then said in interview with Lisa Owen for The Nation (see video above) that was broadcast on Saturday morning that it was the Reserve Bank's job to focus on monetary policy and macro-prudential tools.

"We’re always looking at the tax system and immigration, and there’s been a number of changes in those areas. The Reserve Bank may not be familiar with those," English said.

He would not agree to a migration review.

"No, we’re not committing to doing that, and the Reserve Bank does not have a detailed understanding of how the tax system or the migration system works," he said.

Asked, therefore, if the Reserve Bank was wrong, English said: "They’re putting a view of theirs out, but they’re not in the policy-making process, and so there’s adjustment going on in those areas continuously."

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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agree with RBNZ on this one, and showing third term government is losing touch with the people


I can confirm they have lost touch.

My wife and I were long term members of the party and financial supporters. Even we have chosen to end the relationship with National for the foreseeable future.

If there was a vote tomorrow Winston would get both of us.

The new people on Winston's party list must be getting really excited!

Me too but Winston should come clear that he will not go with naional.

Best opporunity for winston peter in next election provided he plays his move smartly.

It's not about that. It probably wouldn't matter if Winston did go with National after the election. The vote for Winston is a protest vote. It's about sending a message to National, because they don't seem to be listening....

During the time you were typing this National imported two wealthy Chinese to replace you. Welcome to the scrap heap with the rest of us.


I think this is hilarious. Not the least of it the way the No2 has been delegated the job to scrap it out with the pollies. The battle for unearned income heats up.


He said, we said.
All talk no action, Oh for some real leaders.

"The banks are getting more and more concerned about the risk inherent in this market so I don't think they're going to get carried away."

History is no guide.

For anyone who is not familiar with the popular delusions and the madness of crowds I recommend the following:

Part 1 of Memoirs of Extraordinary Popular Delusions and the Madness of Crowds Volume 1 by Charles MACKAY (1812 - 1889).

Also available for free as eReader version from Project Gutenberg, and audiobook version from Librivox.


RBNZ are right. They are charged with maintaining financial stability. They are between a rock and a hard place as we have a strong currency, weak inflation and a housing bubble. One and two require a low OCR and 3 requires an increase in the OCR. Whatever measures they take, if they act too quickly they run the risk of crashing the market leading to recession and a banking crisis. Hardly financial stability!

On the other hand the Government has the ability to modify immigration and taxation policy and slowly release air from the bubble. They won't act however because of stubborn ideology and a fear of crashing the house of cards they have created.

I suspect Mr Market will ultimately solve this impasse but at enormous cost to the country. National have caused this mess but I doubt they will be around to clear it up.

Some nice clarity there.

The fear is well justified. Sustained falling prices will lead to a panic as the parasites run for the exits.


At this point I wouldn't be surprised to see Wheeler resign before the end of the year.
Poor guy. Everyday a new expert in monetary policy from the school of JK and BE criticising him for doing the leg work before announcing policy.

I hope he does resign.

Leg work, as you put it, should have been done long ago. We now have a very urgent situation on our hands and the RBNZ is going to just now start running through their processes.

Not acceptable.

Many thanks for validating the key point of my comment.

Armchair economists...The story of New Zealand, and Auckland for decades now; why have robust long term planning when we can just spend our time fighting fires in the short term.

Don't mention it.

You think I place myself in the 'armchair economist' bracket simply because I think contingency actions should be thought out in advance rather than waiting until the wolf is in the house?

That sounds like complacency to me.


To what level will National goes to protect non resident foreigners, that is now picking up fights with RBNZ.

They never listen to people, experts and now picking up fights with anyone and everyone. If can do it with RBNZ, will do with anyone who does not listen to them.

It all shows frustration on their part as they denied the crisis but now is getting bigger and uncontrollable to a level, where it is not possible to deny any longer. So the frustration that their denial and lie is in open and are wishing it to go away and wants everyone to act but not themselves.

Wonder what is preventing them to take action on demand side for this crisis could never be solved alone by supply. Whom are they trying to please or under what obligation are they and to whom, that they are so desperate not to act and are ready to take on each and everyone in NZ .

Also are frustrated that if they act now, it will be a sign of acceptance that their is a Crisis (whether one accepts or not, one cannot change the facts) Or Is arrogance and ego that is preventing them to act now.

May be time for national to think about change of leadership as with change comes new idea and determination to act.

Yes, I agree. You read leadership well, particularly when it appears not to be in control.

Time for a complete review of job descriptions of all concerned, you think ?


Secret Mens Business

"English says RBNZ doesn't have detailed understanding of tax and migration policy, and may have missed recent moves"

Does anyone know and understand what these secret (recent) moves are? - what is the plan?

If the gang of 4 keep kicking the RBNZ to do the dirty work for them, so the gang of 4 can keep their hands clean, and Wheelman resigns, who in their right mind will ever accept a future appointment

I said right at the outset, at the time of his appointment, I was surprised Wheeler ever accepted the commission (given the TPA) and should have given them the 2 fingered salute. Key and English could end up with an RB without a head to kick

Here it is in black and white

13 June 2014

14 December 2014

In the past I have been critical of Wheeler, but I think he should stay.

If Wheeler can keep the NZ economy afloat through these stormiest sea's NZ has ever seen, then he might go down in history as the best Governor we have ever had?

Seriously, have you ever seen before what is happening now?

To list some of a few: The GFC, ChCh, Auckland house prices, Milk price, Councils broke, ... and now the PM, minister of finance et al. all having a go at him....? It's becoming quite surreal....


No one is asking national to crash the market but by working with council and rbnz to remove the air from the bubble to avoid loud burst.

Any sensible government will act, at least now. If this is not a crisis, how come it is news day in and day and is topic of discussion whenever any one meets - this initeslf is a sign of Bubble .

RBNZ is correct in showing government a mirror. Not a big fan of Labour but at least they are accepting that their is a crisis and trying to find ways to remove air from the bubble and not talking just about supply - though supply is important but by inteslf is not sufficient and also supply will take few years and does it mean that should let the house prices run amok.

I do not think national is aware of the situation and has any idea what to do as their arrogance prevents them to think logically and sensible.

aklnz is correct may be time for other national leader to think of possible change in leadership, which will happen anyhow next year after the election, then why not a year earlier to boost their chance of winning the 4th Term.

You cannot remove air without it bursting. It's too late for that now.


Nats are sticking to message on immigration. Unfortunately that means they are all wrong together. It's a screwup of monumental proportions.They represent the desired skills list only lets in people who are were needed by desperate employers.
Nearly all of the immigrants I see are not employed in high skills occupations, and often found in small retail. These are not occupations that we are desperate to fill.


This is being handed to Winston on a plate....

..You can see how this will play. Skilled Kiwis (or those capable of being skilled) will leave or not come to Aucks. Thus Joyce and his cronies will advance this engineered shortage as a need to keep the gates open and birng in more more more. The 'more' will be those who don't mind living 20+ to a house.

I guess that neither of them want to be the one that that make the final push that sends our crazy property market over the cliff (where it belongs).

remove the air from

never seen the "air" removed from an overheated sharemarket without tears....

First out best dressed, this is about money not homes.... We should expect to see the NZ housing market trade more like any financial market now.

it has been acting like a ponzi financial market for ages, the fundamentals do not stack up to buy an investment property that returns less that it makes (loss making) apart from capital gain.
that is why it must crash, all ponzi's crash sooner or later and we have a number of factors
High Immigration, low interest, plenty of credit, BBQ talk about wealthy property owners, tax advantages,
government not willing to act, zone restrictions
keeping this one going once one or two go BOOM


I can see three buses all coming along at once

Real Estate
S & P 500

Feels very 1987.... People are leading very leveraged lives, Student debt, Mortgages , Car Finance , Credit Cards.

up my friend, it will be way worse than 1987.

Okay , for us that see this disaster coming what can we do to save some value while things re-balance ?
I think it's more world

Global Stock-markets

Thoughts ??


One way or the other it wil be #jkexit as wouldnt be surprised if it happens from within national party.

Trying to be a bully and force agencies to do things which is expected from them is unacceptable. Slowly and steadily all agency will stand up now.

Leaders have to act from front for people and agency to respect and follow them.

The RBNZ are correct, in a balanced market we would not require LVR restrictions. John and Bill continue up the hill.

I like some of the frankness from the RBNZ on this issue finally. very refreshing to hear.

They will continue up the hill but are slowly and steadily pushing kiwi from the hill. How many will survive, will have to wait and watch.

No, NATs don't want this to end because if the banks slow down their money creation, it will slow down the spending and inturn return the govt to a whopping deficit.

Next act in this play is a downgrade of NZ banks by the ratings agencies

time to introduce 5y terms.

Good on the RBNZ. Sometimes you have to tell the boss - no - when they are doing something really stupid

It seems that there are many parties who have a vested interest to make this look more like a crisis ( when it is really not) ... talking about the issue day in day out in the media does not mean it is a matter of life and death, Airing interviews or sympathy drawing docos ( like Sunday yesterday), and publishing inflative articles, doesn't make it a crisis ... its not that the country is running out of houses to buy or rent ! but they have become unaffordable for some, not all !! and these Some like to have it their way regardless of any other consideration of National Interests ( like immigration, skill shortages, balance sheet, economy etc) .... Bill English was right, the RBNZ should focus on its Knitting and avoid getting their nose into areas they are not experts in ... otherwise everyman and his ... can have a say on how to run the country and push for it ( claiming that the Gov is not listening to its people!!!) ... I say that these articles are not really helpful as drumming the same march over and over will have negative consequences beyond the agendas of the people who are pushing it and gathers all sorts of ill informed herds behind a mirage... after this issue cannot be solved by the flick of a switch will take years to sort itself anyway you do it ... BTW, diminishing negative gearing does not deflate the bubble, it will outright burst it ...
No one knows what the Gov plan on migration is .. and maybe they are not in a position to make it public either, maybe they have a target to fill both skills and economy, maybe they are collecting money so they can give a tax break to everyone next year or maybe they have international agreements that are part of secured trade deals ,,, joe blogs doesn't know that and he doesn't need to know!.
Yes Mr Market will sort things out eventually, ( and it does both ways up and down) but no one wants to give it a chance to stabilize ...and its not only immigration that is throwing the spanner in the wheels of MR Market, THE Councils ( specially ACC) is the big culprit in all this (with all of its delaying tactics and lack of planning) who at the moment are hiding behind velvet curtains and leaving the Gov to take all the blame ... its time to make everyone responsible for its current and previous actions/mistakes ( or the lack of them).
Targeting and blaming the PM or others is easy, you try the helm for a change and you will find out how stiff it is !!


Someone just depleted the Sahara of sand in order to get their head far enough under to write this rant.
The National Party convention obviously had some good and strong Kool-Aid on tap this year...


yes i like the part we dont know what the government is doing but they must know best, sounds like people that follow their GPS no matter what they see in front of them

The phone call's coming from inside the house.


"No one knows what the Gov plan on migration is .."
"joe blogs doesn't know that and he doesn't need to know!."

I completely disagree with this. Migration is a very important policy choice for a country, and as such the goals and future plans around this topic should be widely available to the public and made very clear and justified by the party in power.
Another thing. Migration can have an effect on the financial stability of a country. It would be irresponsible for the RBNZ to not voice their opinion if they see this policy decision significantly affecting financial stability.


Quite right, in fact it should be part of any future government's election manifesto. I don't recall National going to the country with a plan to have immigration at these lofty levels!


Negative gearing is already being reduced in the UK

and removing it is becoming more popular in Australia

It's a subsidy from the taxpayer to landlords and completely out of place, why should a tenant pay taxes to subsidize their landlord?

LOL, trust me I'm a politician

"The banks are getting more & more concerned about the inherent risks in this market"

Since when?!

Just kill the bubble already

Housing Crisis it is and the only thing that can be argued is how much will it will fall, when it happens.

It is a concern as a result in media and debated everyday. Not a life and death situation now but will be for many when it burst.

Ticking time bomb. Has happened everywhere and everytime and this time is no exception.

I agree Roy, but look at 2008 GFC drop 5 - 10% in Akl on average ( obviously depends on the area) but it stagnated for a couple of years and then resumed because of either organic growth or lack of supply ,,, and the GFC was big in all proportions,


"Organic growth" - all that extra cash floating around from QE, looking for somewhere to go aint organic. Overflowing immigration aint organic.

The 2008 GFC was tiny, a taster, a tester to see if we would choose to learn. We didn't. We tripled down on debt and forcing economic theory to work in reality. Blindly following the same ideology that created the issues isn't going to solve anything. Doing the same thing over and over again and expecting a different result equals what?

New Zealand partially side-stepping the full force of the GFC appears to have given many the dangerous delusion that we're magically immune.

"because of either organic growth or lack of supply" - you seem to have conveniently left out record low interest rates and speculation.

Since the 2008 GFC Central Banks have dropped interest rates to unprecedented levels in an attempt to reflate the global economy with precious little success. Leverage is higher than before the GFC and when the next crisis hits CB's have nowhere to go as they are pretty much at zero.

$10 trillion is already in negative yielding sovereign bonds as the smart money is now more concerned with return of capital than yield. We may live on an island but we are connected!

That's right Tom, lowering interest rates was the emergency hand brake that all the banks in the world have used to stop the deterioration of the markets , NZ was lucky in the sense that it didn't have much poisonous credit swaps and derivatives attached to houses that have found themselves underwater overnight... and we were a good example... my point is we still are , there is nothing delusional about banks making it very tough for investors right NOW to buy a second or third property , they value everything that you have at 70% not just your new investment ... as for speculators ..they must have at least 30% equity in everything that they own to be able to apply for a loan .... that is a devaluation of the net worth of anyone who thinks about buying an investment right now./// having said that , this does not stop the Kiwis, Aussies and UK cousins to buy houses as they come back to work or live in NZ ... ask real estate agents and they will tell you that there are currently more of these than Asian buyers in auction rooms .
If LVR goes down to 50% ( which is a huge goal post move) then Banks might begin re evaluating their customers portfolios and net worth, which might force a lot of mortgagee sales ...

Eventually some QE money will ( and did) land here, Central banks can do more, few around europe have negative rates and few bonds have negative yields ... so it CAN be worse ...and the world is not recovering from this illness of deflation yet as we will get the aftermath of BRexit at some stage

we were saved most of the damage of the GFC because the Australian government stood behind the big four as guarantor, back then they had plenty of room on the country balance sheet and a good credit rating.
a lot has changed since then APRA have made the banks carry more capital if GfC2 comes along they would do whatever it takes to survive now they don't have that backup.
if it means cutting their NZ subsidiaries loose to fail they will.
that is why it is very important that our RBNZ makes sure they don't get into trouble

There were specific reasons why NZ didn't get hit as hard as other places. It's been covered and explained many times. Let's just say, any illusion NZ is immune from these events is naive at best. We got bailed out just in the a very very stealthy way that average mortgaged NZder's know little about.

Our bubble will go when the foreign investor loses interest in hiding their cash here. Our bubble will go when the Aussie banks find themselves being classed as too risky to invest with. Our bubble will go when critical jobs loses start to appear like a tidal wave.

I'm actually fine with the current setup on negative gearing. But with this qualification. Going into a property with negative cashflow proves you are in there for the capital gain. I'm fine for people to have their tax deduction, but then each and everyone of them will have to pay tax on the capital gain.
Given the capital gains in Auckland the last few years, there is going to be huge tax coming in.

" the Reserve Bank does not have a detailed understanding of how the tax system or the migration system works,"

Does anyone???

Only National Party Knows.


Lets face it; if Bill can understand it, it mustn't be too difficult...Whatever it is..

In a nutshell: you work for 50 years, pay tax ,OK?
Immigrants come and live off your taxes,in new house in Auckland, work best avoided,OK?
According to Winston, who understands things more deeply(when it comes to getting votes anyway);OK?


Time to have a binding referendum on migration..#ourownexit

We need to build heaps of robots , then we wont have to bring in unskilled immigrants....

No good, robots don't consume, therefore no growth in the economy!

You'd be surprised.

Any new technology can consume a lot of time and energy to set up, and if you're not careful, can be superseded with new technology by your competition before return on investment is realised....

How about the RBNZ do the job they are required to do?!? If they want to make political decisions then they should be like everyone else and stand for election!!!

Lisa Owen appears to have gone into that interview with BE with a mindset the bureaucracy are right and seems to forget they are unelected officials who are not doing the job that has been requested of them.

Interesting comment from everyone.

It is really funny (stupid) for anyone to say that their governor is not that intelligent person to know anything about tax and immigration.

Arrogence blinds and power corrupts.

Interesting comment from everyone.

It is really funny (stupid) for anyone to say that their governor is not that intelligent person to know anything about tax and immigration.

Arrogence blinds and power corrupts.


Everyone should remember that government is elected to serve the people and not rule over people. Are answerable to the people and if anyone questions them or give suggestion should take it humbly on its merit instead asking everyone to mind their own business or stand for election specially senior and experienced people like governor.

This situation would not have come if government was doing their part. Government is also for the welfare of the people besides looking after ecenomy. Need leader with vision to be proud of and feel bad to say that same cannot be said about the current government though had voted for them.

Everyone is tired of their denial and cover up.

Amen to that

Everyone should remember that government is elected to serve the people and not rule over people. Are answerable to the people and if anyone questions them or give suggestion should take it humbly on its merit instead asking everyone to mind their own business or stand for election specially senior and experienced people like governor.

This situation would not have come if government was doing their part. Government is also for the welfare of the people besides looking after ecenomy. Need leader with vision to be proud of and feel bad to say that same cannot be said about the current government though had voted for them.

Everyone is tired of their denial and cover up.

I still think they should stop interest only mortgages as they have elsewhere in the world. It would prevent negative equity for when the downturn comes.

BE " we've always said, the core issue here is supply..."

Then why are you planning to build less houses than required to meet annual demand?

It's the usual bluff, spin and BS.

BE, no not really - just BS.
Demand has always been the issue.

If it's obvious that immigration is putting pressure on our welfare system,our schools,houses, our hospitals and infrastructure but the government is determined to keep immigration at record levels someone must be benefiting.
We just have to ask the right questions.

Larger revenue base perhaps... keeps wages low (unless you work for government), house inflation (happy banks) ...? i suppose like everything else you have to look where the money is going... to the 1% thats who benefits the most from excessive immigration?

Nats in disarray. Stephen Joyce now making policy announcements on the hoof via twitter.

I think the next round of polls will be telling. If the Nats hold their ground while appearing to be in full Basil Faulty mode, then nothing will shift them.

And what if they drop 3 points suddenly they need WP and what price would they pay, my bet they would sell their mother to stay in power

What they need right now is to keep the wheels on. Political management has been the bedrock of this govt and they now appear to be genuinely in disarray on this issue. Joyce's cock up is just the latest of a fast growing list. Think Bennett announcing policy without English knowing, think Key and English lashing out at the RB, think almost any announcement that has come out of Nick Smiths mouth. If they keep this up Winston would be crazy to hitch his wagon to the Nats.

Good management, more like a good supply of gaffer tape

The Finance minister and most politicians see growth as the only way forward and the easiest growth is by immigration. The problem is, these new Kiwis need to be housed as soon as they arrive so when you allow more people to enter the country than you have houses, there is going to be a problem... Add to the mix... tax incentives, a low interest enviroment and letting the rest of the world buy your existing housing stock, and suprise,,, your houses are now unaffordable to the average Kiwi, not to mention the people paying more than half their wage in rent, this was not part of the Kiwi dream
The government needs to listen to the reserve bank and fix these flawed and unsustainable policies immediately.: end rant..

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Days to the General Election: 35
See Party Policies here. Party Lists here.