The Reserve Bank – Te Pūtea Matua welcomes the direction it has received today from the Minister of Finance. The Bank is
tasked with considering how it can contribute to the Government’s housing policy objectives, consistent with its
financial stability objective of promoting a sound and efficient financial system.
The Minister of Finance has announced he expects the Reserve Bank to have regard to house price sustainability when
making its financial stability policy decisions.
“The Minister’s direction is in tune with our recent advice to the Government in which we detailed the many influences
on house prices, including the actions of the Reserve Bank,” Reserve Bank Governor Adrian Orr says.
The direction (under section 68B of the Reserve Bank Act) requires the Bank to have regard to the the impact of its
actions on the Government’s policy of supporting more sustainable house prices, including by dampening investor demand
for existing housing stock, which would improve affordability for first-home buyers.
The Monetary Policy Committee’s (MPC) targets meanwhile remain unchanged, that is to maintain stability in consumer
price inflation and contribute to maximum sustainable employment.
However, the Bank will be required to outline, amongst other things, the impact of its decisions on the Government’s
housing objectives. The replacement MPC remit, which is effective from March 1 2021, requires the Committee to assess
the effect of its decisions on the Government’s policy relating to sustainable house prices.
Mr Orr says the adjustments increase the focus on understanding and communicating the impact of the Bank’s decisions on
house price sustainability.
“We have a long-standing commitment to transparency about our policy actions and approaches, and this will continue,” Mr
Orr says.
The Bank 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.More information:Detailed response from the Reserve Bank to the Minister of Finance (Sent 9 December 2020) (PDF 632KB)Initial response letter from Reserve Bank Governor to Minister of Finance (Sent 24 November 2020) (PDF 527KB)