Pay equity grab wrecks wage rises worth up to $17b over 4 years, paying for $14b of tax cuts for NZ's wealthiest; Developers salivate over Kāinga Ora's Auckland land 'goldmines'; 3m fewer hours worked
I think its broader as this wasn't in the National manifesto. National have been dragged further right due to weak leadership and for the good of the term, are playing serious damage control. ACT don't need women voters, National definitely do. Did you see how quickly Luxon came out to say it's providing clarity and isn't an attack against women? He knows what it looks like, and he knows we know.
The rank hypocrisy of this government - announcing the intention to introduce a Regulatory Standards Bill the same day as yet another retrospective law going through under urgency.
The ferry costs you ref are shocking, reek of lack of accountability, maybe corruption, certainly ridiculous overpayment of consultants, and show Winston and Nicola are not coping or competent here. We deserve much more starting with transparency!
...and, until we have new ships, we've going to lose rail capability (with the Aratere being retired due to port redevelopment). Someone should run the numbers on how many more millions that is going to cost us, by decimating rail freight for at least 3 years
It also perpetuates a Road Block in the South Island for any and all shipments North for Livestock and Root Crops & other goods, including Timber, and hinders both the domestic & Export Market Economies.
The Chain effect of this stupidity will stress every Port and Shipping Terminal South of Cook Strait to schedule & reschedule outbound goods that they have not had to handle in the past.
This inaction will have the effect of shifting the South Islands Mason / Dixon Line from Canterbury to Auckland & Tauranga as Port of Wellington is not fit for purpose in it's current disheveled state after the Ferry's Infrastructure was put on hold.
The South Island is about to become invisible once again for Tourist Dollars because no Tourist in their right minds will be pulling $500-750 a night out of their pockets for Accommodation costs, along with the already high costs for Transportation, Food & Sight seeing expenses & additional Airfares just to get to Christchurch from Auckland.
I don't see how these forced Austerity costings and further cuts to Critical Public Services is going to do anything but put us Deeper in the Economic Hole.
"St. Peter don't you call me, cuz I can't go! I owe my Soul to the Company Store & their Banshee Accountant without ANY real Credentials for the Job"! None of this makes any credible sense!
Once again, Where's Winston on the invisible Ferry's Deal that was going to be cheaper and far better than the Contracted Deal Nicola flushed down the Capital Gurgler with no plan B.
I guess Little Marco is going to Save Winstons arse and Resurrect the Arizona from the Bottom of Pearl Harbour, chip the rust off and loan it to us to keep our Ferry Service in operation.
Just point the Pom Pom Guns straight up and put some sheets on em to use as Sails! What could possibly go wrong with such a Tight Plan??? Thanks Uncle Sam!!!
I'm sure our enemies will know where to invade when they show up anywhere on the South Island once the Embarkation line is shifted to Auckland.
Queenstown will make a wonderful Headquarters for visiting Chinese, or American Troops, or whoever else shows up! At least they'll be able to go faster on our Roads with the higher speed limits now...
Is it too late to ask for a Recount on the October '23 Election???
Very sad as I watched David Parker's speech, to lose someone with his grasp on both tax and equity, and on climate change is huge. An impressive man whose intellect and moral compassion will be surely missed
Please everyone - if you're working and can join a union, join a union. If you're not a member of the Labour, Greens or TPM please join. Or donate. It's time to get active and start the fight back and organises in case of a snap election.
TOP may have great policies but they have regularly demonstrated that they cannot win a seat. I have been very underwhelmed by their actual performance.
I don't think we need another Atlas Group Offering in the Political Industry Mix, do we??? The Taxpayer union is already overloaded with the 3 numptie's already there to create polls for...
There is also potential for a bad resonance to occur between loosening the capital requirements of banks with the new CCCFA.
This isn't so much just about the retrospective relief (which is bad enough by saying there is no consequence to actions) its also about these parts of the CCFA:
#1 Transfer oversight from the Commerce Commission to the Financial Markets Authority (consolidating market power and administration to a regulator historically focussed on market efficiency rather than consumer welfare
#2 Reduce lender accountability for borrowing costs when they fail to disclose key requirements. (A big shift of risk from the financial sector to consumers)
#3 Eliminates personal liability on the requirement of directors/senior managers to undertake due diligence. (Results in no personal consequence for the executives and directors of businesses who undertake reckless lending)
These three additional loosening actions combined with the sudden loosening of capital accelerating credit release is a high-risk gamble. It is of course a gamble cynically designed to restart increased wealth accumulation from residential property inflation in time for 2026.
And just adding to this the little footnote about ASB hiring 80 new mortage processors. (The RNZ link)
ASB with ANZ are a main recipient for the retrospective relief under the CCFA.
So two additional things:
- They are increasing labour to process more and faster credit release.
- 80 percent of New Zealand homeowners were expected to refix their home loan within the next year. In other words 80% of homeowners will be active in the housing lending market leading into the 2026 national election.
According to Stats NZ (2023 census) about 29% of NZ households owned a home and made mortgage payments. 80% of home owners who will be re-fixing is therefore about 448,000 households.
The 2023 Census also tells us that the composition of owner-occupier homes are more likely to be couples (with or without children).
What this means is there are likely to be 896,000 voting New Zealanders who will be engaging in re-financing their home loans in the next 12 months leading into the 2026 election.
Also note that should one of these organisation get in trouble, depositors will take a haircut under the Open Bank Resolution process used by RBNZ to rescue the shareholders of failing banks.
Women, Māori, Pacifica, doctors, nurses, teachers, police, renters - rarely do governments so deliberately piss off so much of the electorate so blatantly while at the same time subverting due process. It is almost as if Trump was following the script written by Luzon’s puppet masters?
And my placard will read "Dana, take a pay cut." Government women MPs should be paid less than their male counterparts obviously!!!! Or don't they wish the new legislation to apply to them??? I haven't copywrighted that so feel free to use if your Government MP is a woman.
I am not sure I have the words to signal how I feel about the change to pay equity law, nor about how legislation was fast-tracked under urgency. I was thinking of words like scandalous or terrible or unjust but then I realised that maybe it is more about shame. It is shameful that an Aotearoa New Zealand government has agreed to treat workers in such an unfair and unjust manner. It is shameful that a small group of elected representatives can consciously agree to harm the wellbeing of so many in our communities. It is shameful that select MPs think they know better than thousands of employees in Aotearoa New Zealand. It is shameful that the LIVES of so many will be ruined on the basis of an ideology of tax relief.
I think this comment from Bernard will be circulating in my head for a while to come: "That effectively means the planned $14 billion of tax cuts going mostly to New Zealand’s landlords and highest earners are being paid for by wage cuts for the poorest New Zealanders, almost all of whom are women."
Exactly. I am also struggling for the words. It's so nakedly cynical (right down to trotting out all the female cabinet ministers to announce it). By definition any dollar talked about being 'saved' here is just a direct admission of quantity of the current underpayments to these workers.
As someone who is in a role that was in the midst of a pay equity claim, I feel this very personally. That is now money that I can't spend, that would have gone into the NZ economy (not to mention that I've been underpaid my whole working life, because of the job I chose to do).
My pay equity has been around 4 years coming, constantly stalled and told it's still on the radar - those higher up in the same category received their pay a couple of years ago (people who are already on $100K upwards) but those of us in the bottom pay ranges were waiting, waiting, waiting. I am devastated. My union has been active, but how do you deal with the pricks who make decisions under urgency to kneecap us? Even more disappointed in the COC.
Agree Collin, Shame is the word for this travesty. BvV has no empathy whilst spouting empty rhetoric. All workers are of value in a just society. Even MPs who are voted to SERVE all NZers not just the wealthy.
With regards to the ferries, why didn't Willis just buy them if they cost about $500 million and then sell them immediately if they weren't what she wanted? She could have then engaged Peters to but smaller ferries. The way she's gone about it is an exercise to spend close on $1 billion by the government from which she emerges Scot-free.
The cynic in me thinks that the main reason the Gov went for lower income women, is because they are least likely to be able to afford to move overseas :. Being stuck in a job & income rut. For those who can, I wish them all the best.
The economic & industry scarring this country has, is going to take several generations to recover from, even under the most accommodating governments. 😞
This Coalition almost looking like they now know they not re electable and so ramming thru their toxic R) wing agenda program like religious zealots...or am I missing something.
Further eg,s
The latest statement re destructive Seabed mining and petition circulating by Coromandel Watchdog another example.
The attack on Medical Regulatory Structures ie Medical Council re keeping Public safe yet another example that is a real cause for concern .
As for PA,s ie Physician Assistants...a failed UK role we absolutely do NOT need in NZ ..
It appears they think the public will just accept all this destructive policy without a murmur....I Don't Think So🙄
Structural Failures in Monetary Policy: The Role of Bank Credit and CPI Design in Housing Market Inequity in New Zealand
Abstract:
This critique addresses a critical structural flaw in New Zealand's monetary policy framework—specifically, the exclusion of housing and land prices from the Consumer Price Index (CPI), which serves as the primary target for inflation control. It highlights how excessive private bank credit, primarily directed toward mortgage lending, fuels housing price inflation and exacerbates wealth inequality. By failing to capture this dynamic, the CPI-based inflation targeting system disables the economy's primary monetary "alarm system," contributing to an unsustainable and inequitable housing market.
1. Introduction
New Zealand's housing crisis has drawn attention for its persistent price escalation and its exclusionary effect on younger and lower-income populations. While numerous factors contribute to this problem, a deeper structural critique reveals that core elements of the monetary policy framework—especially the reliance on a narrow CPI inflation target—are central enablers of this systemic inequity.
2. The Role of Private Bank Credit in Asset Inflation
Banks in New Zealand, as in most modern economies, create new money primarily through the issuance of credit. A disproportionate share of this credit is allocated to residential mortgages. This credit allocation inflates demand for housing and land, causing prices to rise significantly faster than incomes or general consumer prices. This dynamic drives asset inflation, particularly in the real estate sector, without contributing meaningfully to productive output.
3. Exclusion of Housing and Land Prices from the CPI
New Zealand's CPI methodology, like that of many other countries, excludes the prices of land and housing as purchased assets. Instead, it includes "imputed rent" for owner-occupied dwellings—a theoretical estimate of what homeowners would pay to rent their own home. This approach fails to capture the real-world inflation experienced by first-time home buyers or renters and removes the most inflationary component of the economy from the central bank's view.
4. Consequences for Inflation Targeting and Monetary Policy
The Reserve Bank of New Zealand (RBNZ) uses CPI inflation as the primary indicator for setting interest rates. By excluding housing asset inflation, the CPI gives a distorted picture of economic conditions, particularly underestimating the extent of inflation driven by bank credit expansion. Consequently, the RBNZ is unable to respond appropriately, allowing housing bubbles to grow unchecked. This undermines the integrity of inflation targeting as a mechanism for monetary stability.
5. Resulting Economic and Social Inequities
The misallocation of credit toward unproductive asset inflation contributes to worsening wealth inequality. Those with access to property benefit from rising equity and capital gains, while those without are increasingly priced out of ownership and even rental markets. The structure of monetary policy thus becomes complicit in deepening intergenerational and socio-economic divides.
6. Policy Recommendations
To address this structural deficiency, the following reforms are proposed:
Reform the CPI: Include real housing purchase prices and land values to provide a more accurate measure of cost-of-living inflation.
Credit guidance or macroprudential controls: Limit excessive mortgage lending through loan-to-value and debt-to-income ratio constraints.
Asset price monitoring in monetary policy: Introduce dual-mandate or supplementary indicators that incorporate asset price inflation into monetary policy decisions.
Public credit creation for housing: Explore alternative housing finance mechanisms, including public banks or cooperative models, to reduce reliance on private credit creation.
7. Conclusion
New Zealand’s current monetary policy framework inadvertently facilitates housing market distortion and deepens inequality by relying on a CPI that omits the most inflationary segment of the economy. Addressing this foundational flaw is essential for restoring both monetary integrity and economic fairness. Until asset inflation—particularly housing—is recognized and managed within the monetary policy regime, the system will continue to fail its core mandate of price stability and economic well-being for all citizens.
Here’s a concise handout/summary document version of your presentation, ideal for distribution to policymakers, stakeholders, or as a meeting brief:
Monetary Policy and Housing Inequity in New Zealand
How CPI Design and Bank Credit Expansion Drive Structural Inequality
Summary:
New Zealand's housing crisis is exacerbated by flaws in monetary policy design—particularly the use of a Consumer Price Index (CPI) that excludes real house and land prices. This structural blind spot allows excessive bank credit to fuel asset inflation, deepening wealth inequality while evading the policy tools designed to maintain economic balance.
Key Problems:
Bank Credit Fuels Asset Inflation
Private banks primarily issue new credit for mortgages.
This inflates housing prices without boosting productive capacity.
CPI Excludes House and Land Prices
The CPI uses "imputed rent" rather than actual purchase prices.
Real housing inflation is invisible in official inflation data.
Monetary Policy Blind Spot
The RBNZ targets CPI inflation with interest rate adjustments.
Exclusion of housing prices disables an essential economic "alarm."
Rising Inequity
Property owners benefit from asset inflation.
First-home buyers are priced out, worsening generational and class divides.
Supporting Data:
House Price Growth vs. CPI (2000–2024):
House prices have risen 3–5x faster than CPI over two decades.
Source: Stats NZ, RBNZ
Mortgage Lending Dominance:
Over 60% of private bank lending goes to real estate.
Source: RBNZ Sectoral Lending Statistics
Recommendations:
Reform CPI Composition
Include actual house purchase prices and land values.
Credit Policy Reform
Use macroprudential tools (DTI, LVR) to moderate credit flow.
Dual Mandate for RBNZ
Add asset price monitoring to inflation targeting.
Promote Non-Bank Housing Finance
Support public or cooperative housing funds with state-backed credit.
Conclusion:
The structure of monetary policy in New Zealand must evolve. Without recognizing and responding to housing asset inflation, current policy settings will continue to exacerbate housing unaffordability and inequality. It’s time to rewire the system so the economic "alarm bells" actually ring.
I am saddened beyond measure by this government's continued hypocrisy, lies, and complete lack of empathy or remorse. They couldn't care less about the impact of their actions on people who will suffer for them, i.e., those on low - to moderate incomes. Thanks, Bernard, for trawling through the daily horror show to keep us up-to-date. You surely need the occasional time-out to soak up some timeline-cleansing surroundings and activities.
How many Nattional voters asked for such a substantial wealth transfer?
I think its broader as this wasn't in the National manifesto. National have been dragged further right due to weak leadership and for the good of the term, are playing serious damage control. ACT don't need women voters, National definitely do. Did you see how quickly Luxon came out to say it's providing clarity and isn't an attack against women? He knows what it looks like, and he knows we know.
The rank hypocrisy of this government - announcing the intention to introduce a Regulatory Standards Bill the same day as yet another retrospective law going through under urgency.
Another dead cat thrown on the table. Such a trumpian strategy.
Thanks Bernard. D Parker reasons for leaving politics are potent. https://www.thepost.co.nz/politics/360680676/david-parker-signs-some-people-call-me-wonk-it-could-be-worse
The ferry costs you ref are shocking, reek of lack of accountability, maybe corruption, certainly ridiculous overpayment of consultants, and show Winston and Nicola are not coping or competent here. We deserve much more starting with transparency!
And there is imo, no chance of having new ships in operation in 2029, let alone 2026 as was the original timeline.
...and, until we have new ships, we've going to lose rail capability (with the Aratere being retired due to port redevelopment). Someone should run the numbers on how many more millions that is going to cost us, by decimating rail freight for at least 3 years
It also perpetuates a Road Block in the South Island for any and all shipments North for Livestock and Root Crops & other goods, including Timber, and hinders both the domestic & Export Market Economies.
The Chain effect of this stupidity will stress every Port and Shipping Terminal South of Cook Strait to schedule & reschedule outbound goods that they have not had to handle in the past.
This inaction will have the effect of shifting the South Islands Mason / Dixon Line from Canterbury to Auckland & Tauranga as Port of Wellington is not fit for purpose in it's current disheveled state after the Ferry's Infrastructure was put on hold.
The South Island is about to become invisible once again for Tourist Dollars because no Tourist in their right minds will be pulling $500-750 a night out of their pockets for Accommodation costs, along with the already high costs for Transportation, Food & Sight seeing expenses & additional Airfares just to get to Christchurch from Auckland.
I don't see how these forced Austerity costings and further cuts to Critical Public Services is going to do anything but put us Deeper in the Economic Hole.
"St. Peter don't you call me, cuz I can't go! I owe my Soul to the Company Store & their Banshee Accountant without ANY real Credentials for the Job"! None of this makes any credible sense!
Once again, Where's Winston on the invisible Ferry's Deal that was going to be cheaper and far better than the Contracted Deal Nicola flushed down the Capital Gurgler with no plan B.
I guess Little Marco is going to Save Winstons arse and Resurrect the Arizona from the Bottom of Pearl Harbour, chip the rust off and loan it to us to keep our Ferry Service in operation.
Just point the Pom Pom Guns straight up and put some sheets on em to use as Sails! What could possibly go wrong with such a Tight Plan??? Thanks Uncle Sam!!!
I'm sure our enemies will know where to invade when they show up anywhere on the South Island once the Embarkation line is shifted to Auckland.
Queenstown will make a wonderful Headquarters for visiting Chinese, or American Troops, or whoever else shows up! At least they'll be able to go faster on our Roads with the higher speed limits now...
Is it too late to ask for a Recount on the October '23 Election???
Very sad as I watched David Parker's speech, to lose someone with his grasp on both tax and equity, and on climate change is huge. An impressive man whose intellect and moral compassion will be surely missed
Please everyone - if you're working and can join a union, join a union. If you're not a member of the Labour, Greens or TPM please join. Or donate. It's time to get active and start the fight back and organises in case of a snap election.
Excuse me!
And TOP.
To be fully inclusive of viable options.
TOP may have great policies but they have regularly demonstrated that they cannot win a seat. I have been very underwhelmed by their actual performance.
I don't think we need another Atlas Group Offering in the Political Industry Mix, do we??? The Taxpayer union is already overloaded with the 3 numptie's already there to create polls for...
There is also potential for a bad resonance to occur between loosening the capital requirements of banks with the new CCCFA.
This isn't so much just about the retrospective relief (which is bad enough by saying there is no consequence to actions) its also about these parts of the CCFA:
#1 Transfer oversight from the Commerce Commission to the Financial Markets Authority (consolidating market power and administration to a regulator historically focussed on market efficiency rather than consumer welfare
#2 Reduce lender accountability for borrowing costs when they fail to disclose key requirements. (A big shift of risk from the financial sector to consumers)
#3 Eliminates personal liability on the requirement of directors/senior managers to undertake due diligence. (Results in no personal consequence for the executives and directors of businesses who undertake reckless lending)
These three additional loosening actions combined with the sudden loosening of capital accelerating credit release is a high-risk gamble. It is of course a gamble cynically designed to restart increased wealth accumulation from residential property inflation in time for 2026.
And just adding to this the little footnote about ASB hiring 80 new mortage processors. (The RNZ link)
ASB with ANZ are a main recipient for the retrospective relief under the CCFA.
So two additional things:
- They are increasing labour to process more and faster credit release.
- 80 percent of New Zealand homeowners were expected to refix their home loan within the next year. In other words 80% of homeowners will be active in the housing lending market leading into the 2026 national election.
And a further piece of maths.
According to Stats NZ (2023 census) about 29% of NZ households owned a home and made mortgage payments. 80% of home owners who will be re-fixing is therefore about 448,000 households.
The 2023 Census also tells us that the composition of owner-occupier homes are more likely to be couples (with or without children).
What this means is there are likely to be 896,000 voting New Zealanders who will be engaging in re-financing their home loans in the next 12 months leading into the 2026 election.
Also note that should one of these organisation get in trouble, depositors will take a haircut under the Open Bank Resolution process used by RBNZ to rescue the shareholders of failing banks.
Be good if the recording of your end note presentation yesterday was published to subscribers.
Women, Māori, Pacifica, doctors, nurses, teachers, police, renters - rarely do governments so deliberately piss off so much of the electorate so blatantly while at the same time subverting due process. It is almost as if Trump was following the script written by Luzon’s puppet masters?
Join me in protest outside Dan Bidois's electorate office tomorrow 1pm if you're in the Northcote electorate!!
Protests will be in many locations. Just a pity about the weather!!
And my placard will read "Dana, take a pay cut." Government women MPs should be paid less than their male counterparts obviously!!!! Or don't they wish the new legislation to apply to them??? I haven't copywrighted that so feel free to use if your Government MP is a woman.
Two of us today outside Dan Bidois's office, joined for 20mins by Dave - a fellow Kaka reader!! Nice to meet you Dave!!
I am not sure I have the words to signal how I feel about the change to pay equity law, nor about how legislation was fast-tracked under urgency. I was thinking of words like scandalous or terrible or unjust but then I realised that maybe it is more about shame. It is shameful that an Aotearoa New Zealand government has agreed to treat workers in such an unfair and unjust manner. It is shameful that a small group of elected representatives can consciously agree to harm the wellbeing of so many in our communities. It is shameful that select MPs think they know better than thousands of employees in Aotearoa New Zealand. It is shameful that the LIVES of so many will be ruined on the basis of an ideology of tax relief.
I think this comment from Bernard will be circulating in my head for a while to come: "That effectively means the planned $14 billion of tax cuts going mostly to New Zealand’s landlords and highest earners are being paid for by wage cuts for the poorest New Zealanders, almost all of whom are women."
Exactly. I am also struggling for the words. It's so nakedly cynical (right down to trotting out all the female cabinet ministers to announce it). By definition any dollar talked about being 'saved' here is just a direct admission of quantity of the current underpayments to these workers.
As someone who is in a role that was in the midst of a pay equity claim, I feel this very personally. That is now money that I can't spend, that would have gone into the NZ economy (not to mention that I've been underpaid my whole working life, because of the job I chose to do).
My pay equity has been around 4 years coming, constantly stalled and told it's still on the radar - those higher up in the same category received their pay a couple of years ago (people who are already on $100K upwards) but those of us in the bottom pay ranges were waiting, waiting, waiting. I am devastated. My union has been active, but how do you deal with the pricks who make decisions under urgency to kneecap us? Even more disappointed in the COC.
THANK YOU FOR YOUR SERVICE, AND WE WILL BE PROTESTING VOTING AND DONATING.
My mother taught me not to swear, so I find I have nothing to say.
Agree Collin, Shame is the word for this travesty. BvV has no empathy whilst spouting empty rhetoric. All workers are of value in a just society. Even MPs who are voted to SERVE all NZers not just the wealthy.
With regards to the ferries, why didn't Willis just buy them if they cost about $500 million and then sell them immediately if they weren't what she wanted? She could have then engaged Peters to but smaller ferries. The way she's gone about it is an exercise to spend close on $1 billion by the government from which she emerges Scot-free.
the thought to "buy and then sell" almost certainly didn't enter Willis's consciousness.
and New Zealanders are going to suffer the consequences.
For "but" in the third line read "buy".
We now have a government making crisis decisions.
After the election they claimed there was an imaginary financial crisis to make a multitude of dumb changes.
Those dumb changes have now produced an actual crisis - they’ve stalled the economy so hard it’s faltering quickly. What a sad state of affairs.
The cynic in me thinks that the main reason the Gov went for lower income women, is because they are least likely to be able to afford to move overseas :. Being stuck in a job & income rut. For those who can, I wish them all the best.
The economic & industry scarring this country has, is going to take several generations to recover from, even under the most accommodating governments. 😞
This Coalition almost looking like they now know they not re electable and so ramming thru their toxic R) wing agenda program like religious zealots...or am I missing something.
Further eg,s
The latest statement re destructive Seabed mining and petition circulating by Coromandel Watchdog another example.
The attack on Medical Regulatory Structures ie Medical Council re keeping Public safe yet another example that is a real cause for concern .
As for PA,s ie Physician Assistants...a failed UK role we absolutely do NOT need in NZ ..
It appears they think the public will just accept all this destructive policy without a murmur....I Don't Think So🙄
Structural Failures in Monetary Policy: The Role of Bank Credit and CPI Design in Housing Market Inequity in New Zealand
Abstract:
This critique addresses a critical structural flaw in New Zealand's monetary policy framework—specifically, the exclusion of housing and land prices from the Consumer Price Index (CPI), which serves as the primary target for inflation control. It highlights how excessive private bank credit, primarily directed toward mortgage lending, fuels housing price inflation and exacerbates wealth inequality. By failing to capture this dynamic, the CPI-based inflation targeting system disables the economy's primary monetary "alarm system," contributing to an unsustainable and inequitable housing market.
1. Introduction
New Zealand's housing crisis has drawn attention for its persistent price escalation and its exclusionary effect on younger and lower-income populations. While numerous factors contribute to this problem, a deeper structural critique reveals that core elements of the monetary policy framework—especially the reliance on a narrow CPI inflation target—are central enablers of this systemic inequity.
2. The Role of Private Bank Credit in Asset Inflation
Banks in New Zealand, as in most modern economies, create new money primarily through the issuance of credit. A disproportionate share of this credit is allocated to residential mortgages. This credit allocation inflates demand for housing and land, causing prices to rise significantly faster than incomes or general consumer prices. This dynamic drives asset inflation, particularly in the real estate sector, without contributing meaningfully to productive output.
3. Exclusion of Housing and Land Prices from the CPI
New Zealand's CPI methodology, like that of many other countries, excludes the prices of land and housing as purchased assets. Instead, it includes "imputed rent" for owner-occupied dwellings—a theoretical estimate of what homeowners would pay to rent their own home. This approach fails to capture the real-world inflation experienced by first-time home buyers or renters and removes the most inflationary component of the economy from the central bank's view.
4. Consequences for Inflation Targeting and Monetary Policy
The Reserve Bank of New Zealand (RBNZ) uses CPI inflation as the primary indicator for setting interest rates. By excluding housing asset inflation, the CPI gives a distorted picture of economic conditions, particularly underestimating the extent of inflation driven by bank credit expansion. Consequently, the RBNZ is unable to respond appropriately, allowing housing bubbles to grow unchecked. This undermines the integrity of inflation targeting as a mechanism for monetary stability.
5. Resulting Economic and Social Inequities
The misallocation of credit toward unproductive asset inflation contributes to worsening wealth inequality. Those with access to property benefit from rising equity and capital gains, while those without are increasingly priced out of ownership and even rental markets. The structure of monetary policy thus becomes complicit in deepening intergenerational and socio-economic divides.
6. Policy Recommendations
To address this structural deficiency, the following reforms are proposed:
Reform the CPI: Include real housing purchase prices and land values to provide a more accurate measure of cost-of-living inflation.
Credit guidance or macroprudential controls: Limit excessive mortgage lending through loan-to-value and debt-to-income ratio constraints.
Asset price monitoring in monetary policy: Introduce dual-mandate or supplementary indicators that incorporate asset price inflation into monetary policy decisions.
Public credit creation for housing: Explore alternative housing finance mechanisms, including public banks or cooperative models, to reduce reliance on private credit creation.
7. Conclusion
New Zealand’s current monetary policy framework inadvertently facilitates housing market distortion and deepens inequality by relying on a CPI that omits the most inflationary segment of the economy. Addressing this foundational flaw is essential for restoring both monetary integrity and economic fairness. Until asset inflation—particularly housing—is recognized and managed within the monetary policy regime, the system will continue to fail its core mandate of price stability and economic well-being for all citizens.
Here’s a concise handout/summary document version of your presentation, ideal for distribution to policymakers, stakeholders, or as a meeting brief:
Monetary Policy and Housing Inequity in New Zealand
How CPI Design and Bank Credit Expansion Drive Structural Inequality
Summary:
New Zealand's housing crisis is exacerbated by flaws in monetary policy design—particularly the use of a Consumer Price Index (CPI) that excludes real house and land prices. This structural blind spot allows excessive bank credit to fuel asset inflation, deepening wealth inequality while evading the policy tools designed to maintain economic balance.
Key Problems:
Bank Credit Fuels Asset Inflation
Private banks primarily issue new credit for mortgages.
This inflates housing prices without boosting productive capacity.
CPI Excludes House and Land Prices
The CPI uses "imputed rent" rather than actual purchase prices.
Real housing inflation is invisible in official inflation data.
Monetary Policy Blind Spot
The RBNZ targets CPI inflation with interest rate adjustments.
Exclusion of housing prices disables an essential economic "alarm."
Rising Inequity
Property owners benefit from asset inflation.
First-home buyers are priced out, worsening generational and class divides.
Supporting Data:
House Price Growth vs. CPI (2000–2024):
House prices have risen 3–5x faster than CPI over two decades.
Source: Stats NZ, RBNZ
Mortgage Lending Dominance:
Over 60% of private bank lending goes to real estate.
Source: RBNZ Sectoral Lending Statistics
Recommendations:
Reform CPI Composition
Include actual house purchase prices and land values.
Credit Policy Reform
Use macroprudential tools (DTI, LVR) to moderate credit flow.
Dual Mandate for RBNZ
Add asset price monitoring to inflation targeting.
Promote Non-Bank Housing Finance
Support public or cooperative housing funds with state-backed credit.
Conclusion:
The structure of monetary policy in New Zealand must evolve. Without recognizing and responding to housing asset inflation, current policy settings will continue to exacerbate housing unaffordability and inequality. It’s time to rewire the system so the economic "alarm bells" actually ring.
I am saddened beyond measure by this government's continued hypocrisy, lies, and complete lack of empathy or remorse. They couldn't care less about the impact of their actions on people who will suffer for them, i.e., those on low - to moderate incomes. Thanks, Bernard, for trawling through the daily horror show to keep us up-to-date. You surely need the occasional time-out to soak up some timeline-cleansing surroundings and activities.