Twyford Phil: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeTwyford Phil: Questions for Oral Answer — Questions to Ministers[Sitting date: 21 August 2013. Volume:692;Page:12666. Text is incorporated into the Bound Volume.]7.PHIL TWYFORD (Labour—TeAtatū)to theMinister of Finance: Why did the Government through its memorandum of understanding agree the Reserve Bank could introduce loan-to-value ratios without an exemption for first home buyers?Hon BILL ENGLISH (Minister of Finance):Because we have read the Reserve Bank of New Zealand Act and support the independence of the Reserve Bank neither of which the member seems to have done. We do not agree with how the member is characterising the memorandum of understanding. The Reserve Bank has always had the independent power under the Reserve Bank of New Zealand Act to use macro-prudential tools including loan-to-value ratio restrictions. The purpose of the memorandum was to put in place a proper process which included consultation with the Government and others if the bank was considering the use of such tools. There is no question of the Government agreeing or not with the bank’s decision or any exemptions to it. The Reserve Bank operates independently. This question is another example of Labour’s gradual move away from an independent—Mr SPEAKER: Order! That has nothing to do with the question.Phil Twyford: What guarantee can the Government give existing homeowners that their mortgage interest rates will not rise as a result of higher loan-to-value ratios?Hon BILL ENGLISH: This again shows a front-bencher of the Labour Party asking the Government about how it is going to set interest rates. We do not do it.Hon Trevor Mallard: I raise a point of order Mr Speaker. Given your new strict approach to the co-leader of the Green Party I want to ask you whether Standing Orders 383(2)(b) and (c) apply in this case.Mr SPEAKER: They do. I am going to invite the member to ask the question again and I expect the Minister to simply address the question.Phil Twyford: Does he stand by his statement that if it were not for loan-to-value ratios interest rates would have to go up for everyone—Mr SPEAKER: Order! That is now slightly different question to what was asked.Phil Twyford: It is slightly different.Mr SPEAKER: I invited the member to repeat—[Interruption ] Order! I invited the member to repeat the question he asked.Phil Twyford: What guarantee can the Government give existing homeowners that their mortgage interest rates will not rise as a result of higher loan-to-value ratios?Hon BILL ENGLISH: The Government can give no guarantee because the Government does not set interest rates. I know under the Labour Party that is where they are heading away—Mr SPEAKER: Order! The Minister has no responsibility for Labour Party policy.Phil Twyford: How will his KiwiSaver policy which frees up just $5000 help first-home buyers when his new loan-to-value policy means Auckland first-home buyers may need a deposit of $90000?Hon BILL ENGLISH: In case the member still does not understand independent Reserve Banks the loan-to-value ratio policy—Hon Trevor Mallard: I raise a point of order Mr Speaker. I am going to ask you whether in this case Standing Order 383(2)(b) applies.Mr SPEAKER: It certainly does apply as does Speaker’s ruling 176/3 which says that members should not start the answer with a political attack on the questioner or the party that the questioner comes from. Would the member like to re-ask his question? [Interruption ] Order! Phil Twyford can repeat that question.Phil Twyford: How—Rt Hon Winston Peters: I raise a point of order Mr Speaker. You said that members—Ministers—should not start out with an attack on the questioner. That is what you just said which I understood was precisely Mr Norman’s point earlier on this afternoon when you sat him down and everybody else who wanted to contest you said the same thing.Mr SPEAKER: Order! The member should go back and look at theHansard . He will note then the type of question that was asked by Dr Russel Norman. If members ask a loose question with a lot of inference and a lot of political stick they are likely to get something back as well.Hon Trevor Mallard: I raise a point of order Mr Speaker. I would just like to support the comment made by Winston Peters. I think there were two areas where you intervened on Mr Norman. I think you are confusing the two.Mr SPEAKER: Order! If the member is now starting to question my ruling I will take a very dim view of that and the member will not be here for much longer. I have asked Phil Twyford to repeat his question.Phil Twyford: How will his KiwiSaver policy which frees up just $5000 help first-home buyers when his new loan-to-value ratio policy means Auckland’s first-home buyers may need a deposit of $90000?Hon BILL ENGLISH: The member’s assumption is wrong. The loan-to-value ratio policy is a policy of the Reserve Bank. In New Zealand under the Reserve Bank ofNew Zealand Act our Reserve Bank is independent. The member may not understand that but that is how it is.Phil Twyford: Why did the Government set a 10 percent deposit requirement for a Welcome Home Loan and the KiwiSaver first home deposit scheme when most first-home buyers have no chance of scraping up a 10 percent deposit to get a mortgage?Hon BILL ENGLISH: The Government made a set of decisions around KiwiSaver and the Welcome Home Loan scheme that would mean that if the Reserve Bank brought in restrictions then first-home buyers would get a better go than would otherwise be the case. Then the Reserve Bank took into account the Government’s policy decisions. So the Government’s policy decisions had to balance off the opportunity for first-home buyers to be able to get an opportunity to buy a home under a pretty restricted environment on the one hand but on the other hand respect the fact that the Reserve Bank was signalling very clearly it felt that low-deposit loans represented a risk to financial stability. That is in the Reserve Bank of New Zealand Act. The Labour Party used to know what—Mr SPEAKER: Order!Jami-Lee Ross: Has the Minister received any reports in support of loan-to-value ratios?Hon BILL ENGLISH: Well as I have made pretty clear it is not a matter of whether the Government or anyone else supports or otherwise the loan-to-value ratio restrictions. That is a matter for the Reserve Bank acting independently. However I have seen examples from some other organisations. One person said: “We support loan-to-value ratios. We have been calling for them for ages as part of reforming monetary policy.” That was Phil Twyford.Phil Twyford: Does he stand by his statement—[Interruption ]Mr SPEAKER: Order!Phil Twyford: Does he stand by his statement that if it were not for loan-to-value ratios interests rates would have to go up for everyone and given that BNZ put its rates up this morning citing loan-to-value ratios has he missed something?Hon BILL ENGLISH: I have pointed out the argument the Governor of the Reserve Bank has made which as I understand it is that he does have a range of ways of cooling the housing market. One of them is to put up interests rates. He has stated a preference that he would rather not do that. As it turns out New Zealand is one of the fastest-growing developed economies in the world and if it is the first country in the world to put up interest rates it could have a big effect through the exchange rate on our economy. That is one reason among others why he prefers the loan-to-value ratio tool.