Courage needed to solve the housing crisis, Reserve Bank Governor says

Successive governments have failed to act on the housing crisis which has triggered a “political economy” problem, Reserve Bank Governor Adrian Orr this morning told Q+A.

House prices continue to soar across the country, with the latest REINZ data last week showing over 20 per cent house inflation nationwide.

“Through time, the governments have found it too hard, too difficult, politically, to make some of the big intergenerational changes that are needed,” said Orr.  

“Governments are elected every three years; these are intergenerational changes. And so, now it is extremely difficult.”

Orr promised more action from the Reserve Bank, as more long-term action must be made.

“We have not done enough of what we can do, and that is what we will be doing over the next few months,” he said.

Two of the options Government has asked the bank to look at are introducing debt to income ratios and restricting interest only loans – for investors only.

While Orr is looking into both, he says they’re very “blunt instruments”.

“Trying to finely target using a blunt instrument, it is trying to kill the fly with the mallet. It is difficult. But being difficult is not an excuse not to try,” he said.

A decision on interest only loans may be made within the next few weeks.