By Alex Tarrant
As the rest of us argue which supply-side factors need to change to make housing more affordable, Westpac economists reckon demand factors like tax settings, interest rates and inflation expectations are the dominant drivers of house prices in New Zealand.
Last week the government released its response to the Productivity Commission's report on housing affordability, backing calls for the release of more land on city outskirts and changes to planning regulations to make it cheaper and faster for houses to be consented and built.
Finance Minister Bill English said the government wanted to address the problem by focussing on the early stages of house building to make it easier for cheaper housing to come on stream.
That was instead of the government waiting for the market to build - or not build - houses and then offering demand-side assistance like cheap government loans or rent supplements.
But Westpac economists said the solution was not as straightforward as the belief that 'dealing to' red tape presented a win-win scenario in which more houses would be built more cheaply. Recent jumps in building consents in supply constrained Auckland and Canterbury actually showed market forces at work, they said.
Market forces at work
Building consent data last week provided some reassurance that housing construction was warming up, at a time when there was a growing amount of soul-searching about the housing market in New Zealand, the Westpac economists said in their Monday morning weekly commentary.
"The Government is focusing its attentions on the supply side, but we need to keep our expectations modest as to how much can be achieved on this front. We have long emphasised that demand-side financial factors have been the dominant drivers of New Zealand’s house prices," they said.
Residential building consents were up 7.8% for the September month, and 22% on a year earlier. However, the headline improvement was overstated by an above-average month for apartment unit consents, which tended to be lumpy.
"And of the 5.6% rise in ex-apartment consents, about half was driven by an unusually strong month for the Waikato region, which suggests we could see an offsetting below-par report for October," the economists said.
"These issues aside, the details were in line with our impression of the housing market: consents are gradually lifting from very low levels, led by the Auckland and Canterbury regions where supply shortages are most apparent," they said.
"It’s worth noting that the rise in consents in the Canterbury region has been quicker in the outer regions than in Christchurch City itself, reflecting the fact that it’s been easier to get the process going there. It’s another demonstration of the long timeline for post-quake recovery; the vast majority of the work in the city still lies ahead of us.
"We’re clearly seeing ‘market forces at work’ in the Auckland and Canterbury regions: a shortfall of supply relative to demand is pushing up prices, providing an inducement to build more. But it’s also clear that this is a slow process, and the effect on house prices has sharpened calls for a government solution to housing affordability," the economists said.
"Last week the Government responded to the Productivity Commission’s recent recommendations on housing affordability, adopting several measures to improve the responsiveness of housing supply such as freeing up more land and streamlining the consenting process. The public response has generally been one of disappointment; our view is that there are limits to what can be achieved down this track anyway," they said.
"We acknowledge that the supply side matters a lot in some instances; it’s clearly a factor in the Auckland market’s outperformance in the last two years, and probably also in the mid-1990s housing boom. But an Auckland-centric diagnosis falls apart when applied more broadly to the New Zealand housing market, particularly in light of the previous decade’s boom."
Tax, interest rates, inflation expectations
Westpac economists made two points about the 2002-07 housing upturn:
- Regional performance: Almost every region saw house price gains of 90% or more, with a few exceeding 200%; Auckland’s 93% increase was actually one of the slowest rates of growth in the country. The rate of house price growth did not correlate with population growth or the rate of building in each region, with some regions losing population even as house prices rose sharply.
- Owning vs renting: While house prices soared in the 2000s, rents only trickled higher, and actually fell as a percentage of household income. If there was an outright shortage of dwellings, it should be expected to see rents rising as much as prices. Christchurch today is a prime example of this.
"So if not physical constraints on the housing supply, then what? For several years we’ve been successfully applying a model of housing valuation that incorporates key financial factors: interest rates, expected inflation, and the tax treatment of investment properties," the economists said.
What was notable was that all three of these factors moved in tandem during last decade’s housing boom: fixed-term mortgage rates were substantially lower, actual and expected inflation drifted higher as the result of a looser target for the RBNZ, and an increase in the top tax rate made property investment more valuable as a way to reduce taxable income.
"Together, these factors can explain a sharp rise in the ‘fair value’ of property as an investment, which by 2007 had become baked-in to market prices," the economists said.
"We suspect the amount of attention paid to supply-side factors partly reflects a hope that a win-win solution must lie within our grasp – that we could have more houses, and cheaper, if only we got rid of the red tape," they said.
The financial drivers of the housing market were not so straightforward.
"The tax system is clearly within our control, but the winners and losers and the disruption that comes with tax reform make it a much harder sell," the economists said.
"Interest rates and inflation obviously fall within the Reserve Bank’s mandate, but over longer timeframes they become increasingly subject to global rather than local forces. Remember that the low fixed-term mortgage rates that fuelled the last boom, particularly during its final years, were often in defiance of the RBNZ’s policy stance."
33 Comments
Yeah right - just change tax rates, interest rates and inflation expectations and people will want to live in a tree instead of in a house.
Might work for discretionary stuff (like beach houses), but not neccessities.
Why not apply the same thinking to food? Make it more expensive so no one will buy it so it will get cheap.
Hugh,
Happy to mostly defer to your significantly greater knowledge on city planning, especially related to Christchurch, but I wonder if the truth is that both supply and demand factors play a signficant role; and that different cities have different dynamics.
The Economist explains it's view on the different US States here:
http://www.economist.com/blogs/freeexchange/2010/04/bubbles
Auckland potentially has a dangerous storm of limited property supply, immigration (both domestic and international) driving demand; and billions of dollars coming in from offshore being aggressively pushed by the banks into the mortgage system. I'm not convinced that people in Auckland really want to live halfway to Huntly in the South, past Albany in the North, or past Howick in the East. No doubt some freed up land there will be helpful, but the Westpac economist make valid points that a 5% mortgage can more or less support twice the house price of a 10% mortgage. Similarly it will support say a 6 times multiple of earnings vs your 3 times multiple. Add in the tax benefits, and there is a recipe for a boom; that does significant damage even if it doesn't get unwound in a hurry. Best it not be let out of control in the first place, although it's probably too late.
As other articles today note, if you fix freed up land on the outskirts (especially in Auckland where few people really want to go), and even somehow magically fixed building costs, that would feed into land prices rather than cheaper houses. That's if there is more or less open borders on immigration; and unlimited foreign money allowed/encouraged into the country.
Hugh,
Have already got outside my comfort zone on another subject in the last couple of days, so should be careful. Am pleased to hear that Bill English is doing some good work in the space; and hope that that will not only result in some extra land being made available, but affordable housing being built that people actually want in places they are reasonably willing to live. Am not holding my breath though, as you probably are not either. Am not 100% convinced that Auckland spreading out significantly further is the right answer for Auckland, either, but happy to not go there for now.
In the meantime I don't give Mr English many credits for apparently blindly ignoring the money supply side, which from memory in just the last 2-3 weeks has seen announced close to $1.5 billion of foreign money coming in through the ANZ and BNZ, inevitably feeding straight in to housing mortgages; presumably at a multiplier pretty quickly of 4-5 times. Westpac and CBA will no doubt match it to keep their market shares up. Once the multiplier is applied to all this you get over half your $25 billion bubble mortgage debt; all in one quarter.
Combine that with his own Debt management office proudly announcing they had arranged another $2.5 billion of foreign money a couple of weeks ago, guarantees not only the housing bubble, but an overinflated exchange rate, and magically, a current account deficit for the period of exactly that amount.
So will defer to you on fixing the housing supply; but still believe mortgage supply/demand is a very important part of this bubble; and it has much wider implications than merely a housing bubble.
Hugh,
All good. In very slight defence of the Westpac economists, I think their comments here are putting their hands up, and saying its getting very dangerous. They will of course blame demand for mortgages, where I think the banks' collective supply is more the issue- but they are two sides of the same coin. If the Reserve Bank and government just ignore the issue, as they appear to be doing, the banks will keep maximising their profits. I don't really blame the banks.
Westpac is even kind of opening the door for the RB and government to do something. No hint from Key, English, or Wheeler of any such action though.
Hugh,
Am totally on your side; have been rather scathing of them in the past. The BNZ tried to paint their recent foreign money as "good for growth in NZ". Here I was merely trying to throw Westpac a bone; they just may be saying its gone too far, and the government and RB need to take some steps.
What, I can't trust what Westpac economists say about housing? Surely that can't be right Hugh, can it? Bank economists are our high priests and the soothsayers of our modern age. They are whiter than the driven snow and we receive their prophecies with unquestioning belief. They are in touch with the gods of housing prices in a way we ordinary mortals cannot be.
Do bank economists have a conflict of interest with regards to housing, I ask?
Having said that, they may be largely correct in the short term. Things seem to go shortage, shortage, shortage until they suddenly change to excess, excess, excess. It seems the process is a long one in this case.
If the Labour led Government had lowered personal taxes then much of that demand would have been taken away. It is not rocket science - people had to structure their personal finances in way that gave them advantage over the tax system. Investing in housing was where the Government gave some leeway and many people used their heads and made some good investments. When it started to get hot and families complained that they couldn't get on the property ladder Helen gave them WFF which kept the fire stoked. Housing supplements to other beneficiaries also became pretty much a mainstream affair.
Labour got greedy with the tax-take and kept growing the public service which increased in size considerable during their nine years. All these new public-servants needed a job and so compliance issues were increased and that is what is constraining supply today.
Making yourself look competent in Politics 101 - written by H Clark.
Rule for Investing 101 - follow the Government when they meddle in any market (thats where the easy money will be).
You are quite correct Hugh, burning economists at the stake would get you into trouble with ECAN for PM10 emissions. However I am not sure about it damaging the 100% pure image, I imagine a purging of economists could be quite cleansing for society. Just hope that developers are not next eh? Right behind the bankers and planners.
There is also a cold hell in Norway
http://en.wikipedia.org/wiki/Hell,_Norway
If that is your preference...
What about price expectations? Sentiment is important! People only take on large mortgages when they expect prices to keep rising. Demand and supply are tied together. 50,000 leave each year for Australia. Don't replace them with immigrants for 12-24 months and demand and supply will correct themselves quickly and take out a healthy chunk of the unemployed as well. Would NZ collapse with 75-100,000 fewer people? Don't think so. Otherwise supply is never going to catch up.
Auckland property values are showing all the signs of a bubble. Australian banks market value is now equal to that of all the banks in Europe, while Europe is certainly in the crap, the Australian banking industry should not be valued above that of Germany banking sector alone. The value of Aussie banks is based largely on the back of their over inflated residential property market, supported by that in NZ. Another sign, Australia along with NZ legalised covered bonds, politicians caved in to pressure from banks, who, you can be sure, are being asked by global investers worried about the security of their lending to provied more security given the current characteristics of the property markets in this part of the world.
There is a scandle around sub prime type lending coming to light in Australia to boot, I do not believe the hype that Aussie banks are better managed than any other banking sector globaly, they all live in the same world.
The central bankers of both the US and UK all missed the housing blow up in their own countries, I would bet on the same here. Australia has had a mega commodity boom, but still had a negative balance of trade. China is having difficulities, look past the government stats, the baltic dry index is flat as a pancake. The US reporting season has seen flat to declining revenues, profits can be maintained by cost cutting and no investement.
Lastly massive QE globaly is vastly distorting markets signals.
I recommend taking the time to watch this piece from Grant Williams http://j.mp/R9hoO8
Yes Hugh your research, knowledge and ability to articulate in a common sense way is very good.
The current property market system is narrow and driven by the few self serving people, interested in protecting and making profit for themselves (developers, speculators, banks, real estate agents, media, councils), which guess ids human nature.
But does not serve the needs of New Zealand society who cant afford housing. The option of either being burdened with crippling debt that affects the quality of life or their children’s; or renting and having no assets to fall back on in ones retired years. Not fair!
The Cantabrian $50K section article is excellent and should be read by all concerned; as it provides a viable solution.
The Government needs to perform its role and step in and equalise the current imbalance (The few controlling property) in society to maintain harmony and insure positive economic growth they keep promising.
Correct. Money the man made medium of exchange will end up making us debt slaves if one doesn't stand against it, particularly when it relates to basic human need.
Why do some people have to have so much money - greed, insecurity, power etc.? One hopesl NZ well not end up being a country full of selfish, arogent, me me me types.
As you have duly noted the ratio needs to be 2.5 times annual household incomes to keep the economic balance, as that in turn well produce economic benefits, construction industry, disposable income, maintain harmony in society etc.
Cheers
What our adversaries need to be asked straight out is......"What gives you the right to deny other people affordable rental or owned housing?"
..........
what gives our adversaries the right to unilaterally decide that NZ would be improved with a larger popluation.:
Savings Working Group
January 2011
“The big adverse gap in productivity between New Zealand and other countries opened up from the 1970s to the early 1990s. The policy choice that increased immigration – given the number of employers increasingly unable to pay First-World wages to the existing population and all the capital requirements that increasing populations involve – looks likely to have worked almost directly against the adjustment New Zealand needed to make and it might have been better off with a lower rate of net immigration. This adjustment would have involved a lower real interest rate (and cost of capital) and a lower real exchange rate, meaning a more favourable environment for raising the low level of productive capital per worker and labour productivity. The low level of capital per worker is a striking symptom of New Zealand’s economic challenge.
”
http://www.treasury.govt.nz/publications/reviews-consultation/savingswo…
On other government policy issues, SWG recommendations include:
- A much more strategic and integrated approach to policy generally.
- Serious consideration of the impact of the level and variability of immigration on national saving, and the impact that this might have on the living standards of New Zealanders. There are indications that our high immigration rate has pushed up government spending, house prices and business borrowing.
- Improving data on household and business saving.
http://www.treasury.govt.nz/publications/reviews-consultation/savingswo…
It's hard to resist,...... I'd love to buy a house but I know it's a bad time... but still every now and then I just about throw in the towel and buy.... then I come over all sensible again and know that if I carry on renting I'm banking masses of cash and that'll psition me better when the crash comes.
Yep, when your rental costs would get you a mortgage it seems strange not to...if you ignore the risks involved.
If I could be bothered I'd guess its worth looking at the first time buyers market in the not so well off suburbs...to see if its that hot or not....Trouble is the hysteria and greed is trumping the fundimentals....then trying to determine whats held off the market as mortgagee sales or ppl just not prepared to take losses and who knows just where the market really is.
Meanwhile the gambling will continue.
regards
I've decided I like you Esprit! My advice to you - just go put some money on a nag in the Melbourne Cup today.... Its probably a better bet than the Auckland housing market. I'm going to - the only day in the year I bet and its fun watching on TV.... Have a lovely day.
Credit is allowed to flow cheaply by the RB to pork demand for housing and steal from savers...it is this policy which is the dominant driver in the housing market.
The consequences are not supportive of stable economic conditions. Peasants shy away from saving and shift to harvest capital gains and in so doing drive a property bubble...which the parasites entended all along and they feed the bubble with yet more cheap credit.
Idiots in the Beehive who are turning a blind eye to this farce..ought to have a gork at the property crash going on in Canada and Australia.
Not good enuff to blather on about policies to ensure failed banks continue to operate with deposits frozen etc.
Gosh... the law of supply and demand is pretty basic...
If Auckland is growing by 10,000 households per yr but is only building 3000 homes ...one does not have to be a rocket scientist to figure out that house prices will go up...
what is it with economists...???? saying stuff like this makes me think they have missed the most basic point........
"We suspect the amount of attention paid to supply-side factors partly reflects a hope that a win-win solution must lie within our grasp – that we could have more houses, and cheaper, if only we got rid of the red tape," they said.
The financial drivers of the housing market were not so straightforward.
"The tax system is clearly within our control, but the winners and losers and the disruption that comes with tax reform make it a much harder sell," the economists said.
THERE IS A FUNDAMENTAL PROBLEM, IN THAT, AUCKLAND IS GROWING TOOO FAST FOR THE AMOUNT OF NEW HOUSES BEING BUILT....
The economists say....:Recent jumps in building consents in supply constrained Auckland and Canterbury actually showed market forces at work, they said.
Really...???? The muted and late response of the "market" gives me a different message.
1/ the gap between existing prices and cost of building new is not that great...( ie. not much profit in it for developers )
2/ when u look at a historical chart of building consents.... the building industry has been in depression for the last 4 yrs...
3/ In a "market economy".... supply should increase to meet demand..... It is kind of obvious that there are supply constraints when it comes to realestate.
Talking about financial price drivers aint going to change that..... ( ie . the economists are talking about influencing demand...to mute price )...BUT.... if prices are muted there is very little "GAP" for developers to bother developing...
Surely ...these economist should see that Supply contstraints are the major issue.
One of my favorite economists..( Gary Shilling)...says " Inventory is the mortal enemy of Price."
I would guess that as the supply/demand imbalance gets worse....rents rises will make the front page of the papers..
The travesty is that our super Council don't seem to really care... This has all been in the making for the last 3 yrs.... They don't really see themselves as part of the problem....
The problem is with your level of economics, economics 101 isnt how the world works, yet it seems some ppl cant get past that, or even to it actually.
For instance whats the skew in property demand?
If we had an overall shortage we'd see price rises across the board even in the less desirable areas, is that the case?
I'd suggest not....if its not then its clearly not a straight forward demand issue based on population.
From the little Ive bothered with it seesm the areas in demand are the highly desirable ones, just where you cannot build.
So building on the fringes wont solve an upper market problem...
"The financial drivers of the housing market were not so straightforward.
"The tax system is clearly within our control, but the winners and losers and the disruption that comes with tax reform make it a much harder sell," the economists said."
Yes exactly, it isnt economics 101, its ponzi scheme 101, Bernie M would be proud.
".BUT.... if prices are muted there is very little "GAP" for developers to bother developing..."
or uh the obvious, demand for them to....
and that sums up hugh as a vested interest, he's a developer with a libertarian axe to grind, double bad news.
regards
Steven... Supply/demand in real estate is location specific... that is where the cliche ...location..location...location..comes from.
If there was a shortgage of bananas...supply can come from anywhere... Supply/demand in Real Estate does not work like that.
SO , in terms of supply and demand... real estate does not behave in the way you imply. ( thats why prices can double in one suburb and not the next )
over time ...you will see that "ripple effect" in prices... out towards the less desirable areas.
Don't want an argument....but after 30 yrs of reading and thinking.... I have found that eco 101 with some commonsense and original thinking is all one needs ...
( I understand your view is for house prices to drop 30-40%... based on your ponzi theories )
Did u miss the main point of my post..... (not sure about the exact numbers)
3000 new houses.... 10,000 more households... It has nothing to do with an "upper market problem"..
Do u have any solutions..???
Not sure what your slur on Hugh is about.
I would welcome an oversupply of housing in Auckland...
In which case opening up the fringes has no bearing on the demand in the desirable suburbs, the housing stock simply cant be expanded for thoese areas...so even building 10000 new homes per annum cant be seen as a solution....not unless that demand is significantly in the less desirable areas, then arguably yes we have bananas supplied from elsewhere.
I take issue with ppl who use the term "common sense", so yeah OK you have thought / studied for 30 years, so have I but my conclusions are, different. There is much I dont know but much of what is being said doesnt seem to add up with what I do.
My comment on the 10,000 homes (say) is that determined by many factors....not least of which is the trend of less ppl per dwelling. Now as ppl become more affulent, then yes, makes some sense. Consider though we are in for a 20 or 30 year stagnation event. If thats the case that decreasing density could probably halt or even reverse. If it is a 20 or 30 year event we may well see ppl can afford to have less children, hence in 30 years there will be less demand.
My comment on the bubble / ponzi scheme is not so much its a bubble mbut maintaining it isnt possible from what I can see due to quite a few factors.
Consider ever rising energy costs on home sizes. It costs more to heat a bigger house therefore that is a negative force on that decrease in density.
My problem with Hugh is he is clearly ignorant and wants to be on things like Peak oil, maths and physics. Therefore when someone so biased trys to make claims based on these I have concerns.
Consider just who is impacted but the pushes of his ilk...I'd personally be very reluctant to try and pursuad someone on a cours eof action that could cause them great harm, yet this is where he is happy to go...
Over-supply is as bad as undersupply, maybe a little over or under makes no odds but too much is a glut which collapses prices, that has a neg economic impact on the country as well as individuals. Too little if its true demand is also bad...yes...if its chinese money running from china, or ppl speculating ie ponzi then thats really bad....
Lets say Im a cautious person and Ive learned of the un-intended side effects of an action can be quite ugly.
regards
Solutions, well first off is there really a problem and how much of it is a real hosuing need and not greed and ponzi dynamics.
So lets say 30% is ponzi, ok really we only need 7000 homes and not 10000, but what if the ponzi is 70%? or 90%?
I agree there is probably at least a short term shortage is it structural? If chch recovers does that ease Auckalnd's woes and by how much? If the chinese run what happens to prices? so many variables and factors we dont have quantified IMHO.
Consider that the housing boom in China estimates that there is enough housing to go out to 2030..tahst some glut....
Consider what thats going to do to their economy.
regards
Nothing wrong with having different views....
Forget the ponzi stuff... forget Central banks and credit growth... forget speculators..
Think Population growth..
Whether people rent of buy .... based on the long term projections.... 10,000 new hoseholds in Auckland each yr and only 3000 ne house built.....Nothing to do with greed .
In your view..where should these people live...????
How would you accomodate them...??
OR...because of peak oil etc..... would dictate to them and have them live where you think they should..???... pass laws to limit population growth.???
I'm not picking a fight.... just debating.... This is the point that I think the westpac economists missed.
Sure ...those finacial drivers are already capitalized into real estate prices NZ wide.... but playing with these will not change what is going to be a fundamental shortage of housing in Auckland.
I'm saying that supply constraints is the fundamental reason why we are having a growing housing shortage in Auckland... which is initially being reflected in huge price gains in the nice areas... ( Even places like Mt Roskill are going up in price)
Even those westpac economists said.... the price gains in the 2000s was NZ wide... Today it is ChCh and Auckland.... ( financial drivers don't explain that difference).
Oh.... and as a consumer..I would prefer oversupply to undersupply... ( yrs ago ..a house might have been looked on as a consumable )
Newton: For every action there is an equal and opposite reaction. If there is a shortfall of 7000 houses per year and people can't find somewhere to live, they will go and live somewhere else. Simple. This is just a likely to result in a couter trend as other areas take up the slack from the Auckland shortfall. So all the raving about someone needing to fix the problem is really just hot air, leave it alone and it will fix itself :-P
There is always one bubble after another no matter whether stock, property, commodities. The key it to get on an off the bubble at the right time. Banks ie such as Westpac have made lots of money , but they will likely need this put away some of this cash for a rainy day when interest rates rise as their could be many people defaulting if funding costs were to rise significantly a few years from now and banks will have to take a heavy hit. People who bought in 2009 / 2010 should be ok even if a house price correction was to occur as they have enough buffer for a correction. Those who bought in 2011, 2012 , 2013 may find if they buy they could be in negative equity in the years ahead. The problem we have around the main cities is these are favoured by foreigners particular Asians who like city life and plenty of money from overseas which they flood the market with the cash purchases that distorts the rest of the market. Prices may be over inflated but their is nothing we can do with the mass population overseas that move to our main cities. Also New Zealand is considered a safe haven for times of War ie China V's Japan, War in the Middle East, India V's Pakistan. Some people see New Zealand at the bottom of the earth to get away from problems that could occur back in their own country.
Demand in Auckland is superficially buyers chasing a limited supply. By turning actual renters into first time buyers the demand equation would be changed significantly. The most damaging aspect is possibly the interference in that equation of overseas domiciled investors and some local immigrants who because of language limitations regard residential investment as the only home for their loose money.
Had this not occurred
1. Prices would not have escalated as far.
2. There would be less number of renters
3. Auckland would be a much better place to live in.
24 October, 2012
Speech to the Massey University conference "Pathways to Metropolis in the 21st Century: Immigration Issues and Futures"
Before I go on it’s worth pausing a moment to look at some facts and figures around immigration:
- New migrants contribute an estimated $1.9 billion a year to New Zealand’s economy*
- one in four New Zealand workers is a migrant
- one in three Auckland workers are migrants.
Fortunately, most of them seem to be enjoying life here. More than 80 percent of recent migrants are satisfied or very satisfied with life in New Zealand, almost nine in ten recent migrants would recommend New Zealand to friends and family and almost three quarters of recent migrants want to stay permanently in New Zealand.
Of those migrants who were approved for residence between 1998 and 2011, nearly three-quarters have remained in New Zealand since taking up residence.
Mostmigrants who come to New Zealand tend to settle in the Auckland region. The last census showed that about 60 percent of adult migrants who’d arrived in New Zealand since 1996 lived in central or south Auckland and that the concentration of recent migrants in Auckland and south Auckland was increasing.
In a statement to the Sunday Star-Times, Coleman said: "Department of Labour research shows there is no strong link between immigration and house prices and migrants provide a net gain to the New Zealand economy of around $1.9 billion a year. If migration stopped today, the economy would contract by 10% over 10 years."
http://www.stuff.co.nz/business/money/4622459/Government-policies-blamed-for-house-prices
Productivity Commision:
We recommend that you:
a agree to the inquiry selection process set out in Appendix 1
Agree/disagree
b agree that Commission’s second tranche of inquiries be selected on the degree that
they:
• are relatively uncontroversial given the desire to establish broad political support for the Commission
http://www.treasury.govt.nz/publications/informationreleases/productivitycommission/pdfs/t2011-2000.pdf
THE case for higher immigration as a driver for economic growth is far from proven, as is the notion that more immigrants can counter the negative effects of population ageing, the [Australian] Productivity Commission says.
In an analysis of the "big Australia" debate in its 2011 annual report published yesterday, the commission said the economic impact of immigration "is sometimes clouded by misperception".
"Two benefits that are sometimes attributed to immigration, despite mixed or poor evidence to support them, are that immigration is an important driver of per capita economic growth, (and) immigration could alleviate the problem of population ageing," it says.
The commission also notes immigration doesn't affect household wages overall, though particular sectors could be adversely affected if there were a large influx of skilled immigrants.
And it warns that trying to slow the impact of an ageing population on the economy by bringing in young workers is only a sugar hit.
"Any effect would be short-lived," the report says. "This is because immigrants themselves age, and progressively higher levels of migration would be needed to sustain the current age structure into the future."
The commission affirms its view that government policy effort might be better spent internally "to improve the participation rates of ... women over 45 and older Australians of both genders."
In May, Population Minister Tony Burke released the Sustainable Population Strategy, which focused on regional development and creating a reliable set of sustainability measures. It deliberately avoided setting a national population target, which had been the focus of much of the policy debate in the lead-up to its release after Treasury's 2010 Intergenerational Report projected a 36 million population by 2050.
The commission indirectly criticised the decision, saying "while focusing on future population targets may be of limited use to policymakers, the rate of population growth is an important consideration."
"How fast Australia's population grows has direct implications for the environmental, urban and social amenity of existing residents. And immigration policy is the most effective mechanism for influencing the rate of growth."
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