Dr's Brash and Bollard on the right track, says Dr Norman

The Government needs to listen to warnings about another housing bubble from the current and former Reserve Bank Governors, said Green Party Co-Leader Dr Russel Norman today.

Evidence given to the Parliamentary Banking Inquiry last week showed that banks have increased lending to housing over the first 9 months of the year by billions of dollars while cutting lending to business.

“This is bad for the NZ economy and bad for business,” said Dr Norman.

“The Government needs to take a carrot and stick approach in order to avoid another housing bubble that will end up damaging the New Zealand economy.

“Due to New Zealand’s love affair with property we are becoming more and more indebted to Australian-owned banks. To curb our romance with the property market we need a capital gains tax on the sale of property which excludes the family home.

“The Government also needs to urgently tighten the rules allowing investors to reduce the income tax they pay because of ‘losses’ on their rental properties, the most common being mortgage payments and maintenance costs.”

Dr Norman also suggested that to stimulate New Zealand's productive economy the Government needs to put more capital into Kiwibank – capital that can then be loaned to small and medium sized New Zealand enterprises.

“So far the big Australian owned banks have been happy to lend money to Kiwis for investing in property while failing to invest in New Zealand businesses,” said Dr Norman.

"It's time we showed some faith in our Kiwi-owned bank and in Kiwi business and started investing in a sustainable economic recovery."

“Directly targeting inflation from the housing market would also allow the Reserve Bank to run a lower interest rate policy,” said Dr Norman.

“This would reduce the cost of finance to small business and would also lower the level of the NZ dollar which in turn would help the tradable sector.”

Link to Bernard Hickey’s submission to the Banking Inquiry
http://www.interest.co.nz/ratesblog/index.php/2009/09/02/interestconzs-submission-to-the-oppositions-banking-inquiry/