By Bernard Hickey
Prime Minister John Key said the government was now doing all it can to help the Reserve Bank avoid having to put up the Official Cash Rate in response to Auckland house price inflation.
Asked if he was comfortable with the Reserve Bank having to hike the OCR in response to a developing Auckland housing bubble, Key told his post-cabinet news conference: "The Reserve Bank has to follow monetary policy as its sees fit. We can't dictate that. The govt is very focused on the issue of house prices going up and is looking to find solutions to those problems."
"We believe there are a number of component parts to that. One is around accessiblity of land supply, which in Auckland we believe is one of the more significant issues and we're working with the council on that," Key said.
The Reserve Bank warned last week it may have to hike the Official Cash Rate to avoid a damaging housing bubble developing in Auckland.
Asked if the Government should have done more in the last four years to help boost housing supply in Auckland and avoid a rate hike, he said: "In fairness, we've got interest rates at 50 years low. Through the government's fiscal policies and other actions we've taken that has at least helped support low interest rates."
Key then said the house price inflation in Auckland, which is now running at an annual rate of 16%, had only recently become a problem.
"In terms of housing price rises in Auckland, for a long period of time that hasn't been an issue, but as confidence returns to the market that's increasingly starting to become in issue, partly driven off very low interest rates," Key said.
"The government wants to assist if it can in the process of making sure land suply is made more readily available and overall the market functions as well as it can, and that's been the basis of some of the RMA (Resource Management Act) reforms, among other things," Key said.
Asked if the government's refusal to immediately approve Auckland's Unitary plan was worsening the situation, he said: "No. Even if the government was to get through legislation have the plan adopted in September, that would not stop the situation where new subdivisions and the likes would be notified and subject to appeal and therefore the process would be a very slow one."
Auckland Mayor Len Brown is pushing for the immediate adoption of the unitary plan, although many in his council want a delay to respond to complaints by those in central suburbs who do not want more intensive development.