RBNZ Governor – Too Much Power?

rbnzThe RBNZ have recently put restrictions in place to curb the property market in Auckland. This is an unprecedented move and an ex RBNZ economics advisor suggests RBNZ Governor Mr Graeme Wheeler has more power than any other central bank Governor worldwide and it’s out of date and highly risky according to a news item on stuff.co.nz.

NZ Judges and the Prime Minister have more checks on decision making the article says. The RBNZ has made some bold moves since Mr Wheeler has been at the helm including LVR restrictions on customers with low deposits and specific restrictions on Auckland property.

While these moves are said to be there to protect the financial system – are they more of a knee jerk reaction? Banks say they can withstand a 50 percent drop in property values and 13 percent unemployment without breaching capital requirements. So would the RBNZ restrictions be in place if there were greater checks on Mr Wheeler’s decision making? The Green Party’s Russell Norman suggests decisions should be made by a committee saying…

A board can more broadly represent the interests of the whole economy in a way that it’s unreasonable for a governor to be expected to.

The initial LVR restriction on low deposit home buyers probably did more damage than good as it locked first home buyers out the market. The gap in low end property sales was then filled by Property investors and now they’ve been targeted with specific LVR restrictions. What next in the RBNZ’s box of tricks?

PropertyTutors believe it will be business as usual for their property investment mentoring clients similarly smart investors and traders in Auckland and around the country will just work with the LVR requirements. Banks want to lend money and it will be available to those who know how to secure it. If loans cost more the costs will eventually be passed on to the tenants who’ll end up paying more rent and saving less for their home deposit. While the Government is focusing on getting more first home buyers into homes the RBNZ is arguably making it a lot tougher.

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