Parker David: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeParker David: Questions for Oral Answer — Questions to Ministers[Sitting date: 19 November 2013. Volume:695;Page:14764. Text is incorporated into the Bound Volume.]7.PHIL TWYFORD (Labour—TeAtatū) on behalf ofHon DAVID PARKER (Labour) to theMinister of Finance: Was he advised prior to signing the Reserve Bank Memorandum of Understanding that LVR restrictions woulddisproportionally affect first-home buyers and that regional exemptions would not apply?Hon BILL ENGLISH (Minister of Finance): In answer to the member’s question no because the discussion prior to signing the memorandum was not a discussion of that nature. The memorandum of understanding gives effect to the macro-prudential tools for the purposes of financial stability. It covers the four tools that were discussed: adjustments to core funding ratios the counter-cyclical capital buffer adjustments to sectoral capital requirements and quantitative restrictions on the share of high loan-to-value ratio loans on residential property. As part of the consultation process required by the memorandum when a tool is being considered for use by the bank the Government is subsequently advised of a range of effects of loan-to-value ratio restrictions.Phil Twyford: Given that the Reserve Bank said last week that if it were to implement exemptions for new builds to loan-to-value ratio limits it could turn to the memorandum of understanding that it has with the Government why did he not ask the Reserve Bank or Treasury to conduct analysis on the effect of loan-to-value ratios on young first-home buyers or the regions before negotiating and signing off the memorandum of understanding?Hon BILL ENGLISH: Because that was not the purpose of the memorandum. The purpose of it was to do what the Opposition I think was actually arguing for a couple of years ago and that was to provide a framework for the use of macro-prudential tools. The member still misrepresents or misunderstands the role of the Reserve Bank. Regardless of what advice we took—and we did take advice—on the impact of loan-to-value ratio restrictions the decision maker is the Governor of the Reserve Bank.Phil Twyford: Does he agree that the fact that the Reserve Bank Governor is now suggesting that new builds might be exempted from loan-to-value ratios shows that the loan-to-value ratio policy was rushed out untested because his Government had done nothing on housing in 5 years?Hon BILL ENGLISH: No and again the question shows that the member is not really watching his portfolio area. The Government initiated the first Productivity Commission Inquiry into Housing Affordability which produced advice that we should concentrate on getting a faster supply of more houses on the ground more quickly. I would note that in recent reports from Australia which is a country that has a capital gains tax no loan-to-value ratio restrictions and a restriction on foreign buyers it now has record low participation by first-home buyers in its market as reported in the last couple of days. That tells us that first-home buyers in Australia and New Zealand bothface the same challenge and that is that the houses are just too expensive relative to their incomes and it tells us that we need to free up the supply of housing to get those ratios down.Phil Twyford: Does it not speak volumes that his Government’s 5 years of inaction in housing has brought about loan-to-value ratio restrictions a policy that disproportionately impacts on first-home buyers the young and the regions while he opposes a capital gains tax that disproportionately affects rich multimillion-dollar property speculators?Hon BILL ENGLISH: No. The Government is actually very proud of the action it has taken on housing because of the contrast to the housing market it inherited where first-home mortgage rates were 10 percent—they are currently just over 5 percent—where house prices had doubled and where we had become one of the least affordable housing markets in the developed world. That is what happened under Labour. We are very pleased to have the opportunity to fix those problems.Kanwaljit Singh Bakshi: What steps has the Government taken to support first-home buyers?Hon BILL ENGLISH: The Government has moved to ensure that within the restrictions the Reserve Bank put in place first-home buyers will get more choices. The Government has increased the number of Welcome Home Loans which means an additional 1600 first-home buyers will get priority from banks. The Government changed the criteria for accessing the subsidy from KiwiSaver which means that first-home buyers have the opportunity to pull together a bigger deposit. In the longer term we have moved to cut red tape through the Resource Management Act and local government reforms and we have moved to lower the costs of construction increase land availability and sign up accords particularly with the council of our largest market Auckland which has agreed with the Government that we should aim for 39000 new houses in the market over the next 3 years. Just a few weeks ago the Minister of Housing announced the first batch of special housing areas bringing 6000 new homes to the Auckland market.