Dunne "deeply sceptical" on mortgage levy idea

United Future leader Peter Dunne says he is "deeply sceptical" of proposals to allow the Reserve Bank to impose a levy on mortgages to cool housing demand and inflationary pressures.

"At first glance this sounds like a 21st century version of Sir Robert Muldoon's disastrous attempts in the early 1980s to control interest rates.

"If that experience is anything to go by, the introduction of such a scheme would cause market distortions, as lending institutions worked out ways around it.

"Such a mechanism could only be short-lived, with an inevitable explosion in interest rates once it was lifted.

"Fixed mortgage rates schemes provide stability and certainty for many families and it is not the Reserve Bank's role to upset that, as such a scheme would do," he says.

Mr Dunne says he is yet to be convinced the Reserve Bank lacks sufficient mechanisms to curb inflationary pressures, or that additional levers are required.

"One of the strengths of New Zealand's monetary policy regime has been its independence and separation from political intervention.

"Just as the market has adapted to that regime over the past 20 years, so too must the Reserve Bank.

"Reintroducing interest rate controls through the guise of a mortgage levy seems an unlikely way of maintaining an independent monetary policy," Mr Dunne says.

ENDS

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