Reserve Bank deputy governor Grant Spencer could hardly have been blunter in taking the Government to task over its response to Auckland's overheated housing market. Much of what he said was not new, but there was a heightened degree of alarm about a level of house-price inflation which, he said, meant "an eventual market correction is likely to be disruptive to financial stability and the economy".
Mr Spencer spoke damningly of the Government's almost exclusive focus on the supply side of the equation. He argued convincingly that much more needs to be done to reduce demand.
The Reserve Bank's strong words are a response to the re-emergence of housing pressures since last September, the product of record migration levels, low interest rates and more aggressive lending by banks. The reduced effectiveness of its own loan-to-value-ratio restrictions has also contributed.
Mr Spencer was unequivocal about where responsibility for the pressure lay. The proportion of houses bought by investors had, he noted, increased to nearly 38 per cent in February from 33.8 per cent in September 2013.
These people are responding to a tax system that says borrowing and buying houses is the most sensible form of investment. Inland Revenue and the Government like to deny this is so, but Mr Spencer derailed that notion. The Reserve Bank would, he said, like to see fresh consideration of policy measures to address "the tax-preferred status of housing, especially investor-related housing".
