Dunne Peter: General Debate 
Dunne Peter: General Debate 
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Hon PETER DUNNE (Leader—United Future) 
: 
 One of the roles that United Future as a modern centre party seeks to perform is to hold the major parties in this Parliament to account. One of the other roles we seek to perform also is to ensure that when policy solutions to major issues are proposed they are not in the nature of a knee-jerk or instant reaction. When we look at the current debate around housing affordability in New Zealand we see many of those knee-jerk elements to policy being applied and offered as panaceas for the crisis that we face particularly in terms of young people having access to their first home. 
In this regard I refer particularly to the comments made last week by the Governor of the Reserve Bank in his submission to the Commerce Committee’s inquiry into housing advocating the introduction of a capital gains tax. That is something we totally oppose. Capital gains taxes are unfair they are largely unworkable they are distortionary and they will not achieve the objectives that the governor might seek for them in respect of the housing market in New Zealand. Other measures that have been floated over the last few months come into the same category. Members will recall the mortgage surcharge proposal that was floated a few months ago. Equally I have to say that I am far from convinced about the merits of ring-fencing tax losses on properties for the same reasons that the distortion they create is far greater than the mischief they resolve. 
What lies at the heart of all these issues is that the short-term “let’s have a simple solution” approach outweighs the need to get to the bottom of the fundamental issue. In this instance I think that the big issue we are grappling with and need to confront is the way in which monetary policy is operated at the present time. We have a situation of an overvalued dollar because of high domestic interest rates which are being imposed by the governor because he wants to curb domestic economic growth. All that does is simply to fuel more foreign investment more growth and higher interest rates. The difficulty is that the mechanism that we have adopted for the last 22 years since the dollar was floated and since the Reserve Bank of New Zealand Act was introduced in the late 1980s is a reliance on the interest rate mechanism as the way to control inflation. There are other steps available to the governor. I believe that what the current debate ought to be focusing on is the adequacy of existing mechanisms and whether other steps can be employed to equal effect. I refer to the ratios of cash that the banks have to hold back as an example. 
The danger we face at this stage is that if we do not have that wider debate we put in place a series of short-term measures that will ultimately prove to be ineffective and that will only ensure that at some point in the future we will have to unwind them and start all over again. I see the inquiry that the Finance and Expenditure Committee has decided to undertake into the operation of monetary policy as being a critical exercise here. It is very important that that committee is able to have a full and proper discussion of the issues and is able to make some considered recommendations to the Parliament about the way forward. That debate is not being helped by some of the situations we are seeing at the moment. 
I respect the autonomy of the Governor of the Reserve Bank; I respect his right to express his views. But the difficulty I have with the way in which the debate is being conducted is that essentially it is being sensationalised and individual aspects of a package are being presented as total answers to a particular problem. That will not work. United Future will ensure to the best extent we are able that when we are looking at all of these issues the totality of the issue is under consideration not simply some of the symptoms around the edges. I know that my colleague the Minister of Finance and members from the other side of the House have been involved in discussion and I think that process should be allowed to continue and to mature. But I do not want to see it hijacked by some of these short-term external interventions—these knee-jerk reactions—that are being proposed which simply ensure that nothing of substance will eventuate. So as we grapple with the problems of an overheated housing market and an exchange rate that simply seems to show no signs of wanting to lie down and take a bit of a rest for a while we need to take a more comprehensive approach.