Household incomes have increased by a third in the last four years, while average house prices have risen nationally just 1.3% in the same period, making recent real estate market buoyancy unsurprising, Finance Minister Bill English says.
Appearing before parliament's finance and expenditure select committee today, Mr English appeared to have prepared the figures in advance for questions on the apparent heat in the Auckland housing market, which has seen average prices rise above the levels at the time of the global financial crisis in 2008.
"House prices on average have moved up one percent in nominal terms. Disposable income is up a lot over that period," he said. "We wouldn't be surprised to see a bit more interest going back into the housing market", especially with the lowest interest rates in 40 years.
Mr English tried to bat away opposition politicians who pressed him on forecasts from Treasury, the Reserve Bank and the International Monetary Fund of an unsustainably high current account deficit with the rest of the world over coming years.
He cited the Christchurch earthquake as adding around one percentage point to the forecasts, while expressing a personal opinion that the outlook for New Zealand was better than forecasters believe.
"I'm just a bit more optimistic," he said, since he doubted New Zealand would return to historic levels of debt accumulation. "The fact is we are in a world that's pretty different because everyone's reducing debt."
Households were saving more, which forecasters had originally doubted would happen, and New Zealand corporate balance sheets were stable.
Committed to a Budget surplus
While public debt was growing in part because of borrowing to cover quake rebuild costs and to lean against the impact of the global recession, the government remained committed to a Budget surplus by in the 2014-15 financial year.
If the current account deficit persisted at very high levels, New Zealand would also suffer a "textbook" sharp correction, with a much lower exchange rate among the outcomes.
Green Party leader Russel Norman challenged Mr English on this, asking why the government did not seek to manage the current account deficit down rather than wait for global financial markets to "punish" New Zealand.
Mr English said he was "unpersuaded" by the range of alternative policy options being proposed by opposition parties, saying all had been debated over the past 30 years and there was no substitute for continuing with economic reforms in areas such as land and water use, and the Resource Management Act, to foster faster economic growth.
"If we thought we could manage it, we would go and manage the damn thing," he said. The high kiwi dollar was a "signal from the world" that New Zealand had "sound prospects of producing stable yields compared to other countries".
"Our problem is one of success."
The economy would remain "patchy" and unpredictable. Growth in the first half of this year had been stronger than forecast and the second half was turning out to be weaker than anticipated.
"We think doing 2% to 3% annual growth we will continue to get job growth and continue to get household incomes into reasonable shape," Mr English said.
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