Manufacturers and exporters welcome the Reserve bank of New Zealand’s (RBNZ) proposed expansion of existing Loan to Value Ratios (LVR) today – this should give them more freedom to address continued low inflation and an exchange rate that remains overvalued and challenging for exporters, say the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive Dieter Adam says, “We are pleased to see this action from the RBNZ to continue to sure up the financial system against stability risks in the housing sector. We also support their efforts to look into other measures, such as Debt to Income Ratios, as another tool to protect financial stability.”
“We hope this moves gives the RBNZ more certainty to push forward with cuts to our interest rates to better align them with those in the rest of the world. Inflation remains below target and our exchange rate continues to be overvalued, well above forecasts and the Bank’s own targets – prolonged currency pressure on exporters damages their competitiveness and reduces their ability to make much needed investments for the future.
“However, we know from recent experiences that LVR limits only have a limited and temporary effect on house prices. Rising house prices and rental costs are increasingly becoming an issue for employers, including manufacturers, especially in Auckland. We increasingly hear from our members about people looking at jobs in other cities where their salary would go a lot further – adding to an already serious problem of attracting and retaining skilled workers nationwide, but especially in Auckland.
“Keeping house prices and rents in check is first and foremost the responsibility of central and local government. Government needs to find ways to boost the supply of affordable housing in areas suitable for working people, as well as tackling migration-driven demand spikes and some of the longer term tax incentives that encourage investment in existing housing stock over more productive investment. We should let the Reserve Bank focus on getting inflation in line and ensuring financial stability in our banking system, rather than overloading it with demands and expectations to influence developments beyond its current mandate.” says Dieter.
An NZMEA press release Tuesday 19 July 2016
