The government would be interested in any international moves to prevent the next property bubble forming, Finance Minister Bill English told a business audience yesterday.
Answering questions from the floor at an event in Lower Hutt, Mr English floated the idea of controlling how much people could borrow for property.
"Where the next debate is going to be is over whether the Reserve Bank should be able to stop you borrowing to buy your second and third house," he said.
"So there will be an international debate about whether to try and control the next housing boom or the next speculative recovery.
"We will watch that. If there's any good new ideas come out of it we would use them but, by and large, our Reserve Bank has been using tools that are the most current and up to date."
Speaking to reporters he said he was referring to an ongoing international debate about whether central banks should have the power to control the growth of credit.
"We had credit in New Zealand, lending in New Zealand, growing at 20 percent per year, which on reflection looks too high.
"At the moment it's not a problem. Credit is not growing at all in fact we've got the reverse problem which is credit might not be growing fast enough, but if you look ahead to another cycle we are just following the international debate about whether central banks should have more power to control it.
"We haven't seen a viable proposition and it would take some time. It's one of those things where everyone would need to do it anyway."
Mr English told the audience that he did not think there was a problem with the Reserve Bank and official cash rate (OCR). However, a debate could be had about how the bank worked.
"And right now the way the rules for banks have been laid down by the Reserve Bank their interest rates have moved up even though the OCR stayed flat. So what that tells you is the role the Reserve Bank has for making the rules for lending can have quite an impact, whatever is happening to the OCR.
"So we spend quite a bit of time discussing with the Reserve Bank the interaction between those two tools, and it gets a bit technical because legally they are not allowed to connect them. The Reserve Bank Act doesn't allow you to do that. But in fact it has an impact."
Only weeks ago the Chinese government responded to fears of a property bubble by restricting mortgage lending. It also raised downpayment requirements for second home purchases and banned loans for third home purchases.
NZPA and NBR staff
Wed, 26 May 2010