Wellington, May 9 (IANS) New Zealand manufacturers and exporters on Monday called on the government to discourage investors in the country’s overheated housing market so the central bank can tackle the high exchange rate.
The government needed to send a clear signal to property investors that it considered the current situation to be un-sustainable and that it was determined to take effective measures to address it, said Dieter Adam, chief executive, New Zealand Manufacturers and Exporters Association (NZMEA).
Soaring home prices were discouraging the Reserve Bank of New Zealand (RBNZ) from cutting interest rates to tackle low inflation – which has been tracking near zero – and the high exchange rate, Xinhua news agency quoted Adam as saying.
While increasing housing supply was a core issue, correcting tax incentives should play a part in the solution on the demand side, Adam said in a statement.
“Over time, correcting any tax advantage could help encourage more investment into productive enterprise over housing and property,” said Adam.
“Our manufacturers and exporters are still paying the price for the government’s inaction when higher interest rates than necessary keep our exchange rate high,” he said.
“This also hits the wider economy, hurting our ability to pay our way in the world through exports – not to mention those people for whom purchasing their own home or finding affordable accommodation has become an ever more vanishing prospect.”
The latest NZMEA Survey of Business Conditions showed total sales in March increased 1.28 percent every year, with export sales up by 5.31 percent and domestic sales down by 5.03 percent.
“The exchange rate remains high, and worryingly, this has been increasing instead of following the expected downward trend,” said Adam.
In its last six-weekly review of the official cash rate on April 28, the RBNZ held it at 2.25 percent, but indicated cuts were imminent as inflation remained below the bank’s 1 percent to 3 percent target range.
RBNZ Governor Graeme Wheeler said the exchange rate remained higher than appropriate given New Zealand’s low commodity export prices.
Wheeler also warned that house price inflation in the largest city of Auckland appeared to be picking up and housing market pressures were building in other areas.