MNI INTERVIEW: NZ Property Market Changes Like a  "Rate Hike"

New Zealand Government measures to control the country's rampant housing market were the same as an interest rake "hike" for the economy, and made it less likely that the central bank would change its dovish monetary outlook, according to a former RBNZ economist.

Sharon Zollner, who spent eight years as the senior economist at the RBNZ until 2006 and is now the chief economist at ANZ Bank in Auckland, told MNI in an interview that the central bank would be adding the Government measures "to the downside risk pile."

This week, the NZ Government announced a package of measures to rein in the housing market, which jumped 5.2% in February for annualised growth of 21.5%. A key change in the package was the removal of tax breaks and incentives for property investors.

GOOD AND BAD

Zollner told MNI that the RBNZ would be pleased with the package from a financial stability perspective, but concerned that putting a brake on the housing market could be ill-timed, given the promising, but still uncertain, pace of the economic recovery.

"There's no doubt that the RBNZ geed up the housing market with the rate cuts because there's no doubt that the cuts have driven the market, but at the same time that has created stability issues," said Zollner.

"If they do stop the housing market dead then there is a risk there could be a hole in economic activity before New Zealand's borders re-open.

"The story of the economy has been one big housing market for nine months, and now they are cooling that down and that is a downside risk to growth."