Grant Robertson
Finance Minister Grant Robertson announced that the RBNZ is now "required to consider the impact on housing" when making monetary and financial policy decisions.
Changes have been made to the central bank Monetary Policy Committee's remit, meaning it will need to consider sustainable house prices while working to its existing objectives, supporting maximum sustainable employment and keeping inflation around the 2% mark.
It comes amid growing pressure on the Reserve Bank, which has slashed the official cash rate to 0.25%, and introduced cheap financing programmes for lenders in the wake of the Covid crisis.
Loose monetary policy has helped NZ avoid a worst-case economic scenario, but the RBNZ has been blamed for the record surge in house prices.
The RBNZ has also been criticised for lifting LVR restrictions, further fanning the flames of the housing market.
Robertson's decision comes as the Government is criticised for failing to deal with New Zealand's housing crisis.
The finance minister said: "The committee retains autonomy over whether and how its decisions take account of potential housing consequences, but it will need to explain regularly how it has sought to assess the impacts on housing outcomes.
"The Bank will have to take into account the Government’s objective to support more sustainable house prices, including by dampening investor demand for existing housing stock to help improve affordability for first-home buyers.
"The Reserve Bank’s objectives and mandate remains the same, which is to maintain price stability, support full employment and promote a sound and stable financial system."
In addition to the significant changes, Robertson has asked the Reserve Bank to provide further advice on debt-to-income ratios and interest-only mortgages.
Robertson said: "I want to understand the extent to which interest-only mortgages (particularly to speculators) pose risks to financial stability, and whether restrictions should apply. Some jurisdictions, like Australia, have in the past applied restrictions on interest-only mortgages due to financial stability risks.
"Following the Bank’s request that the Government allow it to make use of tools such as debt-to-income ratio limits, I’ve asked for further advice on how the Bank might implement such tools. I have made clear that in principle I would want these to apply only to investors. It’s important that any potential restrictions do not disproportionately affect first-home buyers and low-income borrowers."
Robertson added: "Today’s announcement is just the first step as the Government considers broader advice about how to cool the housing market.
"We know the rapid increases we have seen in recent months are not sustainable, which has meant many first-home buyers are struggling to access the market. We’ll be making further announcements in the coming weeks on other policy responses."
Responding to the announcement, RBNZ governor Adrian Orr said: "We have a long-standing commitment to transparency about our policy actions and approaches, and this will continue."
In a statement, the RBNZ said it "welcomes the minister’s request for more information and analysis on debt-to-income ratios and interest-only mortgages, and will respond in due course".
