Government may intervene in Auckland plan, finance minister says

Finance Minister Bill English remains confident Auckland will produce a Unitary Plan that allows for reasonable growth in the wake of Auckland councillors this week voting to throw out unpopular zoning proposals allowing for greater housing density in many suburbs.

But, speaking after his annual speech to the Auckland Chamber of Commerce and Massey University lunch, Mr English wouldn't rule out government intervention if the upcoming Unitary Plan doesn't eventually provide ways for Auckland to "grow out or up" to build the estimated 13,000 new houses needed a year.

Mr English said the issue wasn't just an Auckland one but was also in the national interest because of the macroeconomic effects of rising house prices.

"There is a long way to go in the process and there has been a legitimate community discussion on it. Auckland has to grow up or out and Auckland gets to decide which way" he said. "We don't want to see rapid house price rises and rises of 25%  per year and have made that view clear to the council and most Aucklanders understand that."

The council voted to throw out the up-zoning proposals after residents' group were outraged they had been put before the Independent Hearings Panel considering the region's Unitary Plan without consulting the public.

The four-year process is almost ended, with the city's first region-wide blueprint due to be decided in August.

In his speech, Mr English said the government was focused on rapidly rising house prices because they can have a significant effect on the macro-economy and financial stability, can drive inequality as high prices favour current owners, and are a fiscal risk for the government.

The government spends $2 billion a year on accommodation subsidies while 60 percent of all rentals are government-subsidised and the government owns one in every 16 Auckland houses.

"When house prices skyrocket, it means these services become more expensive," he said.

While the latest Real Estate Institute figures show Auckland prices have fallen 5.7%  since September, English said regardless of whether that signals a turn in the market, there needs to be an "enduring solution" to Auckland's housing supply.

And he warned Aucklanders should consider the likely impact on their rates if the city is restricted from growing as it needs to.

By 2045, Auckland is expected to grow by more than 700,000 people, almost the population of the South Island, he said.

Longer term, the government has tasked the Productivity Commission to review planning legislation, including the Resource Management Act, to look at a wider set of options for regulating the housing market given housing is our biggest asset class, worth eight times the share market.

Following comments reported in NBR yesterday where he gave a clear hint he thinks the Reserve Bank should drop interest rates, Mr English said central banks worldwide were grappling with low inflation, with a lot of uncertainty around what was keeping it so low.

The Reserve Bank acts independently and Mr English said any cut was up to the governor.

"New Zealand is in a better position than most because the Reserve Bank still has room to move if needed," he said.

Expectations are that New Zealand's low inflation will drop even further but Mr English said he didn't see any need to shift the current inflation target of within a 1-3%  range on average over the medium term despite inflation consistently coming under that target.

"It's not as bad for the economy as inflation being out of control," he said.

(BusinessDesk)