Tempting as it is to follow up yesterday’s post with some thoughts about how one might assess the Reserve Bank’s performance over recent years, I’m totally tied up today dealing with some rather older Reserve Bank issues. I’m preparing for a meeting tomorrow surrounded by various old documents, a number of legal opinions, and numerous rulings from the Court of Appeal, the House of Lords etc all bearing on some important, but complex, questions about events from 25 years ago. The investigative process has, unfortunately, already thrown up one explicit breach of the law – responsibility for which falls ultimately on the then Governor.
But before plunging back into that, I wanted to comment very briefly on a story Bernard Hickey ran yesterday on Auckland house prices. The headline says “PM says government doing everything it can on Auckland prices”, and from the quotes in the body of the article it doesn’t seem to be an unrepresentative headline. The quote that really caught my eye was this one
Asked if NZ$918,000 was too high, he said: “Well clearly it’s a lot but, there’s a big range and you can go on TradeMe and look at homes under $400,000 in Auckland and there are some.”
The blithe indifference was almost breathtaking. Median house prices in Auckland are closing in on 10 times median income, and the Prime Minister can’t even say prices are too high. He is reduced to suggesting that if you look hard enough you can find a few under $400000.
Those absolute bottom-end houses would still be more than five times median household income in Auckland. A reasonable benchmark for median house prices is around three times income – about a third of the current ratio in Auckland. I’ve never been one of those to criticise the Prime Minister for his wealth, but when he makes comments like this it does come across as someone who has got rather out of touch with the plight of ordinary New Zealanders (especially the younger, poorer, browner ones), perhaps reinforced by two weeks swanning round Europe attending rugby games at the taxpayer’s expense.
The Prime Minister is also reported as claiming that “There is an unprecedented level of construction and consenting now taking place in Auckland”.
I’m not sure quite what he has in mind. His claim took me by surprise, so I went to Infoshare and dig out the quarterly data on the number of residential building consents in Auckland. The latest consents numbers are barely at the peak of the 1990s boom, let alone the 2000s one. Auckland’s population is much larger than it was back then.
Different experts in planning and parliamentary vote-counting might differ on whether the government could do more now, if it really wanted to, on freeing up land use restrictions, and allowing land owners to use their own land as they see fit, and as the market encourages them to.
But what is quite clear is that the government is doing nothing at all about cutting back the immigration target. The number of residence approvals that is granted is wholly at the discretion of ministers, and could be changed tomorrow, requiring not a single vote in the House or any support from minor parties. Cutting back the target from the current 40000 to 45000 per annum to, say, 10000 to 15000 would make a great deal of difference to population pressures on the housing market, especially in Auckland. Cutting back immigration isn’t a direct solution to the longer-term issues about dysfunctional over-regulated markets in land use, but it would make a great deal of difference now. And it is not as if the government, or its official advisers, have been able to show any convincing evidence that New Zealand’s large scale inward permanent migration programme is producing any other net economic benefits to New Zealanders.