Bill English. Photo Getty
The rampant house price inflation which has pushed the
dream of home ownership out of reach for thousands of New
Zealanders is probably over, Finance Minister Bill English
Treasury yesterday gave its interim report on the economy and
The Half Year Economic and Fiscal Update shows the Government
remains on track to post a surplus, albeit an exceptionally
thin one of $86 million, in the next financial year.
Going into an election year, Mr English seized on signs of
economic recovery to underline his Government's claimed
record of solid economic management.
But fast-rising house prices, particularly in Auckland, have
been a persistent economic headache for Mr English's
Government which has tried to tackle the problem with a
series of policies.
Yesterday he said there were "a few reasons" to believe house
price inflation had peaked and while prices would still rise,
the pace of those increases would slow.
Expectations that mortgage rates would go up next year had
"got hold in the market over the last couple of months", he
There was also growing recognition that the Government had
made a "thorough, detailed and long-term" attempt to fast
track the supply of new homes with policies such as the
special housing areas in Auckland and other cities.
The third factor was that with Auckland house prices rising
at 15 per cent a year, people realised "it can't go on
forever, it's going to stop somewhere".
Nationally, house prices as measured by Quotable Value are
rising by just under 10 per cent but Treasury forecasts that
will fall to 5 per cent by this time next year.
However, a risk to that was if New Zealand's recovering
economy attracted more migrants than expected. That would
increase demand for housing in economic hotspots Auckland and
Christchurch and could push national house price inflation to
15 per cent next year - a level not seen since 2004.
That risk aside, Mr English said with economic growth
forecast at 2.7 per cent next year and 3.6 per cent the year
after, households had better prospects for wage increases
than they had had for some time.
Household disposable income had increased by more than 8 per
cent over the last four years in real terms and was forecast
to rise by a further 10 per cent over the next four years, he
said. Wages were expected to rise by 1 per cent a year in
real terms for the next five years.
But he didn't expect somewhat brighter prospects would lead
to households spending up large over the holidays. "Kiwi's
have got pretty realistic over the past few years and they
know if they overdo it now they're going to pay later when
the kids start back at school.
"But why shouldn't they have a bit of confidence? They've
been through a pretty tough time, they've done well, they can
see things looking up - I hope they enjoy Christmas."
Labour finance spokesman David Parker said National had
overlooked the interests of most New Zealanders.
"National conveniently seems to have forgotten that the
overwhelming majority of New Zealanders aren't better off
than they were five years ago. Wages are stagnating and job
growth is lagging behind economic growth."