Focus on housing costs, raise wages not interest rates
"The increase in the Reserve Bank's interest rate, while expected, shows little imagination and will raise mortgage
costs for home owners," says CTU economist Bill Rosenberg. “The focus should be on getting housing costs down, and
raising wages to make housing more affordable.”
“The Minister of Finance has been saying wages will start to rise, based on Treasury forecasts. Wage and salary earners
need to get together to make sure that happens: it won’t happen by just talking about it”, Rosenberg says. “The economy
can afford it: labour productivity rose 10.1 percent between 2009 and 2013 but average private sector wages rose only
0.6 percent in real terms.”
"Rising interest rates will keep the value of the dollar up, threatening jobs in exporters and firms competing with
imports, and add to housing costs." Rosenberg said.
"The increase shows little recognition that inflation was lower than expected in the three months to March, nor that it
is driven mainly by housing costs, apart from the January increase in tobacco taxes. CPI inflation was 0.9 percent for
the year without housing and electricity costs. It was 1.5 percent with them included. And this doesn't recognise the
increasing costs faced by first home buyers when looking to buy an existing home." Rosenberg said.
"Rising housing costs demand more urgent direct action. The Reserve Bank should look at other (macroprudential) policies
in addition to the loan to value ratio (LVR), but better targeted. Construction of new low cost housing needs to be sped
up, particularly in Auckland and Christchurch. The downward pressure on rents from state housing needs to be increased
rather than reduced: pushing state house tenants out of their houses into more expensive private rentals is not going to
help. Tenancy reform is needed to get better long term rentals for those who cannot or don’t want to buy.” Rosenberg
said.
ENDS