House Prices And The Role Of The Reserve Bank

The RBNZ has published its detailed response to the letter from the Minister of Finance Robertson sent on 24 November 2020 and recommends, "amongst other things, that the Government's specific housing objective be issued as a factor for the Reserve Bank to take into account when setting financial policy under section 68B of the Reserve Bank of New Zealand Act (1989) ("the Act") and articulated in the Reserve Bank's forthcoming Financial Policy Remit."

• "Having considered your letter of 24 November 2020, we believe that there are two possible options for strengthening the Reserve Bank's role in relation to house prices:
• Adding a house price consideration to the Monetary Policy Remit
• Adding a house price consideration to the purpose of financial policy 34.
• The first option is not preferred by the Reserve Bank. Under this option the MPC would be required to have regard to the house price consideration provided when formulating monetary policy. This could be formalised by amending section 2b of the MPC's Remit, as suggested in your letter.
• Under the second option, our preferred option, the Reserve Bank could be required to have regard to housing issues in its financial policy settings. This could be achieved using the Reserve Bank of New Zealand Bill (RBNZ Bill), which is due to have its first reading this week. The RBNZ Bill contains a provision for you to issue a Financial Policy Remit to which the Reserve Bank must have regard in its pursuit of its financial stability mandate."
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