New Zealand Treasury Reminds Central Bank About Its Role

 
   By Lucy Craymer 
 

        WELLINGTON, New Zealand -- New Zealand's Treasury has moved to remind the country's central bank that it is mandated to promote financial stability rather than to focus on asset prices, after the bank proposed new lending requirements last month.
        The information comes after markets interpreted recent policy moves as a sign the two institutions were working together to manage the housing market in Auckland.
        "Treasury has been engaging with the RBNZ to suggest that although we accept that house prices have macroeconomic implications, the RBNZ's mandate is focused on promoting financial stability and therefore the policy should be reframed," said a previously private briefing for Treasury chief executive Gabriel Makhlouf that was released publicly Thursday.
        A number of internal documents related to the newly proposed policy were released by the Treasury Thursday following requests under the Official Information Act, which requires government ministries disclose non-classified information if requested.
        The bank proposed several changes to its existing macro prudential policy in May. It proposes -- as of Oct. 1 this year -- that residential property investors in the Auckland Council area using bank loans put down a deposit of at least 30%.
        The central bank also suggests increasing the existing limit for high loan-to-value ratio borrowing to 15% from 10% in the rest of the country, while retaining the 10% limit in Auckland for loans to owner-occupiers.
        The Treasury briefing, however, said that it supported the RBNZ's view that recent developments in Auckland's housing market could potentially pose a threat to financial stability over the medium term.
        Concerns are growing about the overheated housing market in Auckland with house prices 18% higher in the Auckland region in May than a year earlier, compared with an annual increase of 4.2% for the rest of the country.
        A Treasury information release from April, also made public Thursday, said it wanted to be consulted at an earlier stage when the central bank is developing policy, to allow its input to be worked up and taken into consideration.
        The Reserve Bank of New Zealand did not return calls for comment.
        Write to Lucy Craymer at lucy.craymer@wsj.com, @lucy_craymer
        (END) Dow Jones Newswires

        June 25, 2015 04:36 ET (08:36 GMT)

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