Government to announce plans to develop Auckland land holdings

The Government's primary vehicle for getting more houses built would still be its interactions with the Auckland Council. Photo / Greg Bowker

Finance Minister Bill English says land development will boost supply in Auckland.

Next week's Budget will outline plans by the Government to develop its own land holdings in Auckland in a bid to boost supply, Finance Minister Bill English said yesterday.

But its primary vehicle for getting more houses built would still be its interactions with the Auckland Council.

"They are the people who make the decisions about where the houses go and where the water and roads go and so we've got to continue to focus on that discussion," he said.

However, the Government was lifting its efforts to redevelop its own land in Auckland, which he said was pretty extensive.

"We've already announced Tamaki and there'll be a bit more in the Budget related to the Government development of its own land holdings."

Mr English said the most important thing was to get the supply side working better and the Reserve Bank agreed. But he would not be drawn on predictions by bank economists that the Reserve Bank could drop the 3.5 per cent cash rate as early as June or July, adding more heat to an already red hot Auckland housing market in which house prices rose by 17 per cent in the year to March.

"I wouldn't want to prejudge anything around interest rates," he said.

"The Reserve Bank will make those decisions and they have to balance up the impact on the housing market alongside impact on the wider economy. But at the moment a small shift in interest rates down isn't going to make a big difference to the current positive trajectory."

The Government accounts for the nine months to March published yesterday showed a deficit of $358 million. Although it was $856 million better than forecast in December because of higher tax take, Mr English said he still expected the current year to June to end in deficit.

"We are on the right track but we are getting to surplus slower," he said.

"There's plenty of challenges around increasing the supply of housing, regardless of what happens to the interest rate track.

"The bank and the Government have a fairly much view in common about the economics of the housing market and that is the most important thing to get the supply side working better."

Reserve Bank deputy Geoff Bascand has set off speculation that the bank may be reconsidering its aversion to measures that might specifically target Auckland.

"Previously we've indicated we think that's quite difficult but perhaps there may be new ways of it getting a little bit more possible," he told the Otago Daily Times. "We're considering that - it's a time of close scrutiny."

He said the bank would make more comment about it at tomorrow's release of the biannual financial stability report.

English: Kiwis already spending

Unlike Aussies, New Zealanders don't need to be told to carry on spending, says Finance Minister Bill English.

Asked if he would follow the example of Australian Treasurer Joe Hockey, who urged households and business to borrow money and invest when the cash rate dropped to 2 per cent last week, Mr English said "in New Zealand they are doing that".

Bill English said the most important thing was to get the supply side working better and the Reserve Bank agreed. Photo / File

"Australia in some respects is where we were somewhere between four to seven years ago. Their economy appears to be slowing down. They're not used to that and they are trying to work out what to do about it.

"In New Zealand we've been through that low patch and people are out there investing and spending generally pretty carefully, except on Auckland housing where there is a fair bit of enthusiasm."

Mr English said he hoped tonight's Australian Budget would support growth in Australia.

"New Zealand does better when Australia does better. A Budget that underpins ongoing growth in the Australian economy is going to help sustain New Zealand's growth."