Moves against housing market will need support

However in a speech to the Deutsche Bank International Investor Mission, finance minister Michael Cullen said today there are no formal proposals yet and any policy option will need broad support.

Growth in ‘borrowing on the house’ has amplified the increase in house prices and produced a wealth effect that has pushed along domestic demand, Cullen says.

“The Official Cash Rate will always be the main weapon” to help moderate the amplifying effect of credit on the housing cycle.”

However he said tightening tax rules on housing investment and changing bank capital requirements “will help address the ongoing challenge of better managing the domestic economy without hammering exporters”.