In today's email we look into the Reserve Bank's consultation paper on debt to income limits, as well as the latest from select committees and some worrying warnings about the health implications of intensive dairying.
1. A DTI analysis
The Reserve Bank released its consultation paper on a potential Debt To Income multiple limit yesterday and gave its clearest indication yet of what such a limit could look like and its potential effects, including a fall in house prices of up to five percent.
The bank used an "illustrative calibration" for a DTI limit of five times income and a speed limit of 20 percent of non-exempt new mortgage lending. It said banks currently reported about 45 percent of its lending was done over that DTI threshold of five, although the Reserve Bank saw that as an over-estimate that would come down as banks improved their reporting systems.
The central bank said it would be likely to exempt new buildings in any limit, and it said had explored the possibility of exempting loans to owner occupiers of relatively low-priced homes. It again cautioned that it would not use the tool at the moment, even if it had it, and that any actual tool could be quite different to the one modeled.
The bank estimated that a DTI limit of 20 percent of borrowing above five would prevent around 10,000 borrowers from buying a home and potentially reduce home sales volumes by around nine percent.
"This could reduce house prices and credit growth by 2-5%," it said, referring to earlier modeling it did in 2013 on the response to such a market sales shock.
The bank saw a net benefit to the economy of 0.1 percent of GDP, with the reduced risks of losses from a housing crisis of 0.25 percent being offset by a drag on output from the policy of 0.1 percent and the effects of the inhibition of some home purchases of 0.07 percent of GDP.
"The model analysis suggests that the policy would tend to impact on investors more than owner occupiers, which we consider would mitigate the welfare costs," the bank said.
The Reserve Bank wants feedback on the paper by August 18 and pointed out the introduction of a specific tool would require a further round of consultation.
House prices would need to take off again before the bank proposed a specific tool, and then would have to carry out a fresh round of consultation that could take many more months. That would make the introduction of a DTI very unlikely this year, and certainly not before the election.
2. Another housing grilling
Social Housing and Housing NZ Minister Amy Adams was in the housing debate spotlight yesterday at the Social Services Select Committee.
Newsroom's National Affairs Editor Shane Cowlishaw was there and wrote up a full report for Newsroom Pro, including the detail that the Government has spent $21.8 million putting people up in motels.
3. Water heats up again
Along with housing, migration and mental health funding, the issue of water quality and allocation is set to be a key election issue.
Yesterday traditional advocacy groups united with the tourism industry and public health researchers to warn of reputational damage to tourism and agriculture industries, and health risks for rural children.
The Choose Clean Water campaign yesterday released its own seven step "freshwater rescue plan" in response to the Government's national policy statement on water.
Newsroom's Lynn Grieveson reports on the plan and the Government's reaction in detail at Newsroom Pro. The detail about risks of serious infectious disease for rural children is unsettling.
4. Going nuclear
Yesterday was the 30th anniversary of New Zealand's nuclear-free legislation and Newsroom's Sam Sachdeva covered the discussion about nuclear risks in the Foreign Affairs Select committee.
Few talk about the risks of a nuclear catastrophe in the same way as 30 years ago, but that doesn't mean the risks have gone away.
Ramesh Thakur, director of the Australian National University’s Centre for Nuclear Nonproliferation and Disarmament and a former United Nations assistant secretary-general, is among those offering a warning about the need to change course.
Thakur told the committee the world currently faces only two existential threats: climate change, and nuclear war.
“It’s interesting that those who reject climate science are widely derided as denialists, but intriguingly, those who reject the facts of nuclear risk and threats are praised for their realism in most countries.”
5. Weekend Reads
This New York Times piece on the trouble some US teachers are having convincing their students about the science of climate change is an eye-opener. It says a lot about how science has become politicised and how hard it will be to de-politicise it. Amy Harmon's article focuses on one student, Gwen Beatty, who challenged her teacher on climate change because her parents did not believe in it.
“Scientists are wrong all the time,” she said with a shrug, echoing those celebrating President Trump’s announcement last week that the United States would withdraw from the Paris climate accord.
Those wondering why the Republican Party is so dominant in legislative chambers across the United States need to know about REDMAP. It was a strategy cooked up in 2009 to take advantage of a fresh census to redraw the electoral districts across America. This Sean Illing piece in Vox explains the plan, courtesy of a book written by David Daley.
6. While you were sleeping
The attention of the world was on the testimony of fired FBI director James Comey in Washington last night. He accused the White House of lying to the public and said Donald Trump had tried to derail the FBI's inquiries into collusion between Trump's campaign and Russia.
(New York Times)
Bars in Washington opened early on Thursday morning and promised to give away free drinks every time Trump tweeted during Comey's testimony. He hasn't tweeted. Yet.
TVNZ's Andrea Vance reported last night that an Immigration NZ official left Fiji in a hurry nearly two years ago after the death of a Fijian man in Suva after a wild night out on the town with the official.
MFAT officials and local police initially saw the fall from an apartment building that led to his death as an accident, but police there belatedly tried to stop the official's return to New Zealand.
Now the friends of the man, Josateka Narube, are saying the incident was not properly investigated and the official should have done more to help Narube while he lay dying on the ground after the fall. Here's Andrea's text article in in full.
7. Coming up...
Next Monday afternoon Labour is scheduled to release its migration policy in Auckland.
8. One fun thing
Sometimes The Onion is less extreme than the real news. But this piece today captures the mood, and could just as easily be true. Trump Asks Entire Senate To Clear Out Of Chamber So He Can Speak To Comey Alone