KEY POINTS:
The Reserve Bank has again floated the notion of a capital gains tax on rental investment property once it is sold, but at half the normal tax rate.
A capital gains tax has been repeatedly proposed as a means to dent the demand for property, one of the factors that has fuelled rising property prices.
Labour and National have repeatedly ruled out such a tax and Prime Minister Helen Clark said today the bank and its governors had been suggesting a capital gains tax for years.
"The Government has continually ruled out a capital gains tax. We still do," she said on TV One's Breakfast programme.
The Reserve Bank makes the suggestion in its submission to the parliamentary inquiry on housing affordability. It has yet to be presented by Reserve Bank Governor Dr Alan Bollard.
The submission also suggests the Government consider changing its management of immigration and the impact it has on demand for housing when it rises in response to labour shortages.
"This approach may need to be tempered in future in light of migration's apparent sustained impact on the level of house prices."
Taking steps to increase supply would temper its approach.
But the bank also expressed some concerns about Government housing schemes that increase demand, saying they could be self-defeating.
It cites schemes to get more low-income people into their own houses, such as Welcome Home and the proposed home equity scheme, as well as the KiwiSaver scheme which will subsidise first-home buyers.
"It is important in the Reserve Bank's view that such schemes continue to be carefully targeted.
"The aim should be to minimise the impact of such schemes on the overall level of housing demand and house prices.
"This will avoid such schemes being self-defeating."
The Reserve Bank said that given that home ownership rates were not likely to be turned around quickly, "there will be an ongoing role for Government in making provisions for long-term rental agreements that meet the needs of both tenants and landlords".
It also wants better data and analysis on housing.
National finance spokesman Bill English reiterated his party's opposition to broadening the capital gains tax - which is supposed to apply to properties bought for the purpose of trading.
He also dismissed changes to the tax treatment of rental losses.
He said many people were under the impression that housing investment was given a tax advantage and it was not.
Investment in rental property was given the same tax treatment as any other investment such as a business or shares and losses on any of them could be offset against other income.
A move to ring-fence the losses on rental income for different treatment would not be removing an advantage but "actively changing the tax law to weight it against housing", he said.
Mr English said Finance Minister Michael Cullen and Dr Bollard had been "caught up in a moral panic about the housing market".
Dr Cullen had to blame someone for the highest interest rates for 15 years and the export sector was being kicked around.
"Dr Bollard has been a bit the same," Mr English said. "They have been trying to avoid the consequences of using the tools they have by distracting everybody over these other arguments."
A spokesman for Housing Minister Chris Carter said the Government had consistently said it was aware of the demand-side pressures that some schemes that helped first-home ownership might create and it was moving to increase the supply of affordable housing at the same time as it explored these schemes.
The inquiry into housing affordability, being run by the commerce select committee, was driven by National.
- with NZPA
