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National's new Shadow Treasurer Andrew Bayly says the Government should be 'mandating' the RBNZ to ensure the new Funding for Lending money doesn't just flow into the housing market

National's new Shadow Treasurer Andrew Bayly says the Government should be 'mandating' the RBNZ to ensure the new Funding for Lending money doesn't just flow into the housing market

The National opposition says the Government should be "mandating" the Reserve Bank to ensure its new $28 billion Funding for Lending Programme (FLP) is "targeted at the more productive parts of our economy" and doesn't  just end up further fuelling the housing market.

National's new Shadow Treasurer Andrew Bayly says his party supports the independence of the RBNZ, but "we believe the Government can no longer afford to cross its fingers and hope for it to do the right thing". 

He is urging the Government to "temper the Reserve Bank’s latest inflammation of the property market by sending a letter of expectation to [RBNZ Governor] Adrian Orr immediately".

And Bayly's comments come as a long time former Labour Finance Minister and recent chair of the Tax Working Group Michael Cullen says in a column for the Stuff website that the RBNZ "now proposes to add fuel to this raging fire of property price rises" through the FLP.

"Little account seems to be taken of the RBNZ’s other main function – its prudential rules to ensure the financial system’s stability. The rules arguably make it hard to use the new credit to support much venture capital investment or, indeed, any risky lending to the business sector. The risk is that most of it will end up feeding the insatiable appetite of the property market," Cullen says.

Asked on Monday whether the Government could consider writing to the RBNZ and saying it did not agree with what the central bank was doing, the Prime Minister Jacinda Ardern noted the importance of the independent role the central bank has.

“That separation exists for very good reason. And that separation exists for the benefit of New Zealand and equally based on very hard lessons learned. And I have no intention of changing that.  

"Keeping in mind of course we have used our ability to set out when we have an expectation that the Reserve Bank factor in to some of their decision making issues that are important to us.

"And you’ve seen us do that for instance on considerations around employment. But I take very seriously the separation that exists," she says.

National's Bayly says while the FLP could pump up to $28 billion into the banking system " there would be no requirement for that money to flow into productive parts of the economy".

“Instead, it’s likely the new funding will flow straight into the already unaffordable housing market, when it could and should go towards new house builds, local businesses and our agriculture and horticulture sectors."

'House prices could rise 15%'

Bayly noted that economists were now forecasting that house prices could rise by 15% over the next year.

"Our view is that the Reserve Bank can, and should, be requiring banks to direct this new funding into productive parts of the economy, particularly business lending. We have seen this happen in Australia."

If the Government "takes the housing situation seriously" it will send a letter of expectation to the RBNZ Governor immediately, before the new scheme is implemented in December.

"The current runaway house price situation is not sustainable, " Bayly says.

He says since March, housing lending has increased by $8.7 billion while business lending has fallen by $6.1 billion.

"There has been no new funding to support agriculture and horticulture, and little handed out to developers to build new houses.

'Problem not going away'

“The worrying thing is that the Reserve Bank is only about a third of the way through its quantitative easing programme, so the problem is not going away.

“Unless something is done, house prices and the value of other assets will continue to sky-rocket as investors look for higher yields than they can get at their local banks.

“This is bad for first-home buyers. It will make it harder for them to compete with investors and raises the prospect of an asset price bubble pop when things eventually return to normal."

Bayly says the Government needs to take this situation seriously "and tell the Reserve Bank to stop throwing more and more printed money at our overpriced housing market".

He says the the fundamental problem with the housing market - a lack of supply - hasn’t changed and the RBNZ’s actions "have only added fuel to the fire".

"As well as requiring the Reserve Bank to target its new scheme towards business lending, the Government must urgently address the supply constraints by replacing the Resource Management Act, freeing up land, and getting more houses built."

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“This is bad for first-home buyers. It will make it harder for them to compete with investors and raises the prospect of an asset price bubble pop when things eventually return to normal."

Is that the same National party that wants to reinstate negative gearing and repeal the foreign buyer ban?

Building big, fancy houses is a very productive business generating incomes for a suite of people from council workers, surveyors, designers, builders, tradesman, material suppler, driver, real estate agents, commercial board makers ect ......


Ba haaa haaaaaa, nice joke. Once a house is built, it barely gives anything back to the economy long term. Once a business is built...

Yes building new houses definitely gives a lot of people jobs and therefore the banks should be allowed to lend for new builds, just not to buy existing houses.

Or at least slant the playing field towards new builds for a couple of years. Not sure why the gubbmint doesn't give say a 50k subsidy to all new house builds. That's 20k houses if they spend $1b. 200k houses if they spend $10b. Hell at that rate, give all new builds a 100k subsidy to build their 100k houses they wanted. Keep it going for a few years and you would have done kiwibuild without all the s#%t.

Orr could direct the banks to have lower interest rates on new builds and higher interest rates on existing houses.

So many ways to encourage building of new houses, so little political will.

Simple reason not too. The $10k grant to run, guess how much that pushed prices up, (answer is not $10k as that justcounts as equity to leverage off) access to kiwisaver, certainly didn't push prices down.
I can see what your saying but humans and their systems are weird.

The FHB grant is not just for new builds, as I understand it. The whole point is to add to supply as apparently that is the issue (which I doubt considering prices are shooting up, we are building almost more than we ever have and net migration is flat).

You're right, though it is double for new builds. $10k for new builds, $5k for existing property. Essentially a $5k incentive to buy a tiny new townhouse or apartment instead of an existing property to do up that has a buttload more land.

You'd find that the price of new builds would suddenly go up by $50K - $100K if that were done Though it probably still would result in more new houses being built so should be considered.

That's the whole point, if they want to add to supply, sure they will cause the prices of new houses to increase, but they will achieve their goal at least. At the moment they are spending similar money and NOT achieving their goal. Which is a double whammy of dumbness.


... we have a dumb and dirty economy .... so much focus on rising house prices ... and on sending milk powder to China ... at least Covid-19 got rid of the freedom campers ... one small blessing there ....

Wheres the big bucks for infrastructure , education , scientific & medical research , technology .... let's pour tens of $ billions into these .... let's develop a smart , clean & productive economy ..

The current government has a long and traceable tradition of
. caring criminals over victims
. caring beneficiaries over small business owners
. caring co2 reduction over financial viability of businesses
. adding more taxes over pondering how to spend them wisely

Sometimes its very difficult to decide who the criminals are, depends on where your looking from.
Nowdays small and big businesses often are beneficiaries.
Pollution is NOT viable.
Dont see either of those things happening.

... agree there ..... I cant help thinking that if some of the hundreds of $ billions we've poured into houses had gone into research , infrastructure , technology & the like , we'd be up there with Singapore or Switzerland ... higher GDP per person , cleaner environment , knowledge based economy ...

A lot of money is being pumped into infrastructure and research. The current government, arguably a better version of its previous self, is following up on its promise to bring productivity back on the table through long-term investment.

Unfortunately, we don't have the economic capacity to stage a quick turnaround on medium to large projects. Lack of trained workforce and regressive resourcing regulations are making things particularly difficult in this case.

... my question is why it took so long : 9 years of Clark , 9 of Key & English , 3 of Ardern .... all they could see was ever more cows & tourists , ever increasing house prices = 100 % pure they erroneously thought .... 2 decades wasted ... finally , the pollies are starting to get it ....

We could blame the pollies all we want but that's just our escapism from the truth - we're a dumb and lazy bunch with NIMBYism embedded deep in our culture, and feel we are entitled to world-class infrastructure and services without putting in the necessary effort or taking the risk.

Here's an example:
- A recent poll suggests around 66% of New Zealanders admitted that climate change is important to them, but not all are willing to do much about it.
- The same poll found nearly 40% opposed replacing car travel with walking or cycling (compared with a global average of 23 per cent).


Would it be asking too much for some evidence of your assertions?

This is what you get with status quo caretaker governments. A complete inability to change or even think about changing. Why would they when they don't have to do anything and get over 50% of the votes?

I would be very surprised if Labour of GR will do anything. They will just harp on about the RBNZ being independent and them having no control etc, the same as Orr, for the next 3 years, which of course is bulls#%t. The gubbmint controls the RBNZs actions via the Reserve Bank Act, Orr can be given any tools they agree on or can simply issue directions under urgency. I refer to the RBNZ Acts specific provisions:

12Order providing for different economic objective or objectives
The Governor-General may, by Order in Council, on the advice of the Minister, direct the MPC to formulate, and the Bank to implement, monetary policy for 1 or more economic objectives for a period not exceeding 12 months that is specified in the order.
The economic objective or objectives may be—
only 1 of the objectives specified in section 8 (instead of both); or
1 or more new objectives in addition to or instead of either or both of the economic objectives specified in section 8.
While the Order in Council is in force,—
the MPC must formulate, and the Bank must implement, monetary policy in accordance with the economic objective or objectives specified in the Order in Council; and
the MPC and the Bank must disregard either or both of the economic objectives specified in section 8 if so required by the Order in Council.

If the voting public wakes up to the destruction of the productive economy for speculative purposes by then, we might see some action.

Welcome back GBH, I've missed your witty posts. This post is much more serious than the old GBH posts, I do hope the old Gummy Bear hasn't caught Covid and lost its sweet taste for a more bitter one

At least all of us property owners / investors are going to get very rich selling houses to each other at a higher and higher price.

here I am supporting a National finance spokesperson. V peculiar !!


I’m no National voter but thank god someone is stating the bleeding obvious on this one. This issue needs a lot more air time than it has been getting in mainstream media.


Jesus. Have things gotten so bad that I'm siding with National now?

Only took a month - to the day.


You can't seriously believe the party of landlords and housing investors has suddenly warmed up to young Kiwis locked out of the housing market. This is straight out of the 'opposition playbook'.

Just a month ago, this lot openly stated housing inflation in NZ is a supply problem, bright-line test needs to be reduced and NZ should bring in more foreign investment to fuel housing demand.


What politicians say in opposition is meaningless. Grant Robinson was decrying NZ’s woeful productivity and immigration Ponzi scheme in opposition, and once in power, more woeful productivity/ GDP per capita, and the highest rate of immigration on record.

And let’s not forget John Key’s heartfelt speech bemoaning the declining rate of home ownership while in opposition.

It seems the principle requirement to get elected is sufficient time to forget how bad you were last time.

And let’s not forget John Key’s heartfelt speech bemoaning the declining rate of home ownership while in opposition.

Lord Key was a populist (still is) and a proponent of the status quo. Even in his pre- and post-political career, he's shown he's not interested in transformation. He believes in the neo-liberal God.

Ardern is a populist too. She's essentially a globalist.

Isn't the problem that the neo-liberal 'god' is too successful, to the point where we have so much money invested that asset prices are getting out of control. I can think of much worse problems that get caused by other models.

National trying to move into Labour territory without realising ACT is gobbling up National voters. I predict in 2023 National and Act will share the right vote 23% a piece.

Hmmm .... 23 % + 23 % + Winston Peters = ? ...

How was ACT's party vote when National was more to the centre under Key?

Blimey, is National the new Labour and Labour the old National?

Happened to the Democrats and Republicans

If you lend to businesses, the amount of stuff goes up with the amount of money created = RBNZ will miss inflation targets. What they should do is leave pallets of cash around urban areas and let people grab it and spend it.

" keeping interest rates too low and thereby trying to create economic growth, central banks are inducing corporations and households to take on more debt. To a large part, this debt is not used for productive investments... This creates a debt trap as well as rising instabilities in the financial system...Central banks create the instabilities, then they have to save the system during the crisis, and by that they create even more instabilities."

What colour do you get when you mix blue and red?


In a land of:

a) rising real house prices since the 1970s/80s
b) inelastic RMA
c) very limited wealth or capital gains taxes,
d) lack of a population strategy
e) falling interest rates since the 1980's boosting asset prices,

monetary policy is a sledgehammer and simply driving house (LAND) prices to even more unsustainable levels.

Sorry, but given the huge systemic distortions above the argument for the government not to be directive towards the RBNZ holds absolutely no weight.

The pumping up of real LAND prices since the 70s/80s is the most unproductive use of capital possible (we just get rich real estate broker middlemen who add nothing to the economy) & part of the reason NZ living standards have fallen substantially over the same period.

The government could:
a) ban recourse mortgages to rebalance the risk between mortgage lending and business lending
b) require banks to reweight the risks between house lending and business lending
c) either through discussion or legilisation require the RBNZ to set certain LVR or income related levels for mortgage lending

The government must:
- fix the systemic distortions a)-d) above.

To change where investment money goes. You need to change the incentives. Tax reform, specifically bringing back land value tax to offset the economically destructive taxes like income tax and GST is vital.