Reserve Bank sets agenda for next 3 years with low-key comments on housing

Tuesday, 29 June 2021

Finance Minister Grant Robertson emphasised housing in letter to central bank.

The Reserve Bank has downplayed its ability to influence the housing market and talked up other priorities including addressing climate change in its ‘statement of intent’ for the next three years.

The central bank released a letter sent to it by Finance Minister Grant Robertson in March, which set out his expectations of what the bank’s priorities should be over the first of those three years.

Robertson’s letter identified “effective coordination of fiscal and monetary policy, the distributional consequences of monetary and financial policy actions and addressing access to affordable housing” as areas of particular interest.

“An effectively functioning housing market is a critical component of a sustainable and inclusive economy and promotes the maintenance of a sound and efficient financial system,” he wrote.

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Housing was not directly referred to by governor Adrian Orr in the forward to the bank’s statement of intent, but he did note the bank was “deepening its understanding of the distributional impacts of our monetary policy actions on overall economic wellbeing”.

Orr promised a “holistic” approach to the bank’s work and said in a statement that it saw progressing initiatives such as “Te Ōhanga Māori, climate risk, and South Pacific remittances” as key to its purpose and vision.

The bank has been concerned that the costs of sending money to South Pacific countries disadvantages the large number of people in the region dependent on such payments.

The statement of intent’s first reference to housing was on page 15 of the 69-page document and said risks associated with the housing market were accumulating.

“Although financial policy tools can help to address some of the challenges around housing, a broader response is needed to address more wide-ranging societal issues,” it said in a comment that was highlighted in large type the report.