1 April 2011

House prices not main cause of poor productivity

The Government's newly formed Productivity Commission's key area of research will be Auckland's house prices.

Finance Minister, Bill English, said it was critical to efficient allocation of capital in the economy. "If we want to have more investment into the export part of the economy we need the right kind of rules that don't drag that capital back into housing."

NZ Property Investors' Vice President, Andrew King, said that the research is misguided. "If improving the country's productivity is the aim of the commission then surely there are more pertinent issues the commission should focus on than Auckland house prices" said Mr King. "Blaming house prices for poor productivity is distracting attention from the real problems."

"People put their money into housing because it is a major part of their lives that they have control over. With many losing their life savings in managed funds and seeing no growth in the share market, people have little faith in the Financial Services Industry".

"Is lack of capital really the key problem with New Zealand's productivity? Perhaps there are other more serious factors, such as selling our most profitable businesses, like banks, to overseas owners; selling low value primary products rather than hi tech and high value products; poor management of our existing companies; ineffective use of new technology or low economies of scale through focus on the domestic market."

"The obsession with the housing market as all that is wrong with productivity in New Zealand has to stop otherwise we will never get to the crux of the main problems".

ENDS

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