OPINION: New Zealanders, more than anyone, should understand the value of being able to believe what our politicians and public experts say, and then taking actions or changing our expectations in response. We rightly trusted our prime minister’s warnings about Covid-19 at a time of crisis in March last year and collectively took major and painful actions for the greater good over the longer term. It worked, unlike in other countries where either politicians didn’t trust voters, or voters didn’t trust their Governments. Trust and credibility matter too when a Government is trying to run a stable economy, especially when expectations about the future often drive behaviour today. That’s why New Zealand collectively decided in the late 1980s to crush inflationary expectations by creating an independent central bank targeting inflation of 2 per cent with brutal hikes in interest rates.
15th Dec 20, 11:47am
By Gareth Vaughan
The Reserve Bank (RBNZ) has once again raised the old chestnut of having a tool to restrict high debt-to-income ratio mortgage lending included in its macro-prudential toolkit.
The latest request of the Government, whose acquiescence is required, comes in
the RBNZ s response to Finance Minister Grant Robertson, released on Friday, over his concerns about soaring house prices. We have also previously consulted on introducing debt serviceability restrictions, such as debt-to-income (DTI) limits, on mortgage lending. Although we consider that restrictions on high-DTI lending could complement the current LVR [loan-to-value ratio] policy, we note that this tool is not currently part of the Reserve Bank’s Memorandum of Understanding with the Minister of Finance. We request that the Government gives consideration to adding restrictions on debt serviceability (that would include DTI limits) to the permitted tools in 2021, the RBNZ said.