PHOTO: Don Brash on The AM Show. Credits: The AM Show
Former Reserve Bank Governor Don Brash has defended the Reserve Bank’s cheap lending programme, despite its effect on house prices, saying he’d do the same thing if he was still in charge.
House prices have skyrocketed in the past year, despite the recession, with some blaming the Reserve Bank’s refusal to limit its cheap lending to productive investments. It’s loaning out billions to banks at record-low interest rates to stimulate the economy, but despite loan-to-value restrictions it’s expected much of it will simply be poured into the housing market.
Dr Brash, who led the Reserve Bank between 1988 and 2002 before going into politics, said it’s not the Reserve Bank’s job to fix the housing crisis.
“I’d have cut interest rates certainly, and to that extent the bank can be blamed for the current effervescence in the housing market… but the fundamental problem is not the Reserve Bank’s problem. It’s the Government’s problem.”
Current Governor Adrian Orr said high house prices is a “first-class” problem to have, with the alternatives being “depression and having high unemployment”.
Economist Shamubeel Eaqub last week said the Reserve Bank is “completely out of touch” and “asking for trouble” by not putting restrictions on its cheap lending.
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