For the convenience of email-avoiding subscribers and samplers, here's the email sent earlier on Thursday, including Graeme Wheeler's comments on NIMBYs and Auckland's over-valued housing market.
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Graeme Wheeler took aim at Auckland's 'Not in My Back Yard' brigade yesterday, telling the Finance and Expenditure Committee their blocks to housing developments around central Auckland were a factor driving house prices to concerning levels.
He also gave his strongest comments yet about the risks to financial stability from New Zealand's housing market.
Wheeler was talking at the committee's hearing on the Reserve Bank's annual report and had been asked by Labour Finance Spokesman Grant Robertson about what more could be done to address Auckland's housing shortages.
Wheeler said the Reserve Bank estimated Auckland had shortage of 15,000 to 20,000 houses and needed to build 10,000 more a year for the next 30 years to keep up with demand.
"If you look at permits at this point they are running at an annual rate of around 7,500, which is a huge improvement on where they were 2 years ago, but still well short of the 10,000," Wheeler said.
"I think some very good work has been done on opening up new areas but a major challenge there is getting houses built quickly enough, and a lot of those areas are in the periphery of Auckland where people may decide that the transport costs are less attractive for them, or the infrastructure needs might be considerable," he said.
"I think work needs to be done in inner Auckland in addressing the height restrictions and the Not-In-My-Backyard syndrome that's there."
Wheeler said he welcomed the Government's commissioning of work by the Productivity Commission on how issues around zoning decisions, regulatory reform and approval processes.
"I am very interested to see the outcome of that sort of review. But we see it mainly as a supply side problem," he said.
Rents picking up
Wheeler was then asked about rents beginning to rise in Auckland.
He said they had been picking up, but not as much as they had in Christchurch.
"It's been a little bit of a puzzle to us in a sense that, if there was an acute housing crisis, you might have expected to see rents increase more rapidly. But when you look at the analysis in terms of suburb by suburb, which we have taken a look at, you do see some very substantial increases in rent in some suburbs," he said.
'No mission creep'
ACT MP David Seymour then asked if the Reserve Bank's high LVR speed limits were designed primarily to influence the housing market - and did this mean the Reserve Bank had become involved in 'mission creep'.
Wheeler denied the mission creep accusation, saying the Reserve Bank had financial stability responsibilities. He defended the bank's high LVR policy and reiterated its determination to watch the exposure of banks to New Zealand's highly valued housing market.
He pointed out New Zealand house price inflation had been the fastest in the OECD from 2003 to 2007 and that Auckland's median house price was now 50% above the 2007 level, and was high relative to disposable incomes.
"And if you look at those ratios in respect to historical trends in NZ then we are significantly out of line with the historic trend and that's analysis that the OECD and the IMF have done," Wheeler said.
New Zealand's household debt to income ratio had risen from 60% in 1990 to 145% now, he said.
"So you put all those factors together and you start to worry about the potential damage that could happen to the financial system and to the broader economy if you were to see a significant adjustment in house prices," he said.
"And what was concerning us was the banks were competing very aggressively to lend to people with low deposits. So putting all those things together, and the fact the supply imbalance looked as if could take a long time to address, that's why we felt we had to move. So it was a combination of reasons," he said.
"We have a mandate in respect of financial stability and a major asset like housing, which is the biggest asset on banks' balance sheets and also on individual balance sheets, is one factor we need to think carefully about when considering risk to financial stability."
Wheeler was not asked directly about any new Macro-Prudential policy tools or the bank's current interest rate policy.
Elsewhere in the housing debate, Tony Abbott announced non-residents buying homes in Australia would have to pay a A$5,000 fee for homes up to A$1 million, and then a further A$10,000 for every A$1 million after that.
Also, Phil Twyford questioned Bill English about comments from banks revealed in KPMG's FIPS report about 'ridiculous pricing' of housing because of foreign buying.
Treasury lists lessons learned
Treasury's acting secretary Vicky Robertson also appeared before the Finance and Expenditure Committee, assuring it lessons had been learned from the setting up of the Central Agencies Shared Services (CASS), which gave Treasury (along with the State Services Commission and the Department of the Prime Minister and Cabinet) joint responsibility for co-ordinating and managing public sector performance.
"Pace was a bit quick, is one of the big lessons out of that, " Robertson said. "And one of the things that came out very strongly was there wasn't enough diligence done on what the quality of the services or the quality of the organisations were going into that, so there was an assumption made that we were all at the same level, for example, and that just wasn't the case."
Robertson pointed the finger at the DPMC as the source of many of the challenges.
"A lot of the first year of CASS was actually around building up the resilience around DPMC, in particular. The quality and the level of service of DPMC was a lot less than what Treasury had been used to."
Deputy Secretary Bill Moran seemed to suggest that an expansion of CASS was on the cards.
Asked if CASS's service users would look elsewhere for services, he said: "In fact it is the reverse. The discussions we have been having have been around 'what's the future for CASS? what does it look like in three to five years time?' So we are thinking about what functions could be included that aren't currently included and what sort of scope to provide a hub for small agencies across the public sector. So it's reaching a point of stabilisation and now it's a case of thinking about 'what does the future look like for CASS?'"
Tightened commercial focus for advice
Treasury had also learned lessons from the criticism of its advice on Solid Energy, Robertson said, as she batted off an attempt by Labour's Clayton Cosgrove to place the blame on the government for "ignoring" the advice.
"We did quality advice under the frame that was expected then, " Robertson said. "Now I expect my staff to think about that entity, or any entity, within the industry that it is in."
"I think it is true to say that the quality of our advice now is a lot deeper and richer and testing of boards and they assumptions they make. So, in the Solid Energy case, the board made an assumption around the coal price. I now would expect a lot more testing from my staff on that assumption."
"What have we learnt? One of the key things is that we can have great advice, but we need to have ways to make it more compelling and have escalation paths when advice isn't heard, I suppose," she said.
Robertson said Treasury would now pull in private sector directors to put Crown entity boards under more scrutiny from a focused, commercial angle.
"We've been really focused on what the quality of our advice is and bringing in the Commercial Advisory Board has actually been part of testing the advice that we have got with people who are seasoned, very experienced, either on current boards or chairs who can actually test the advice Treasury has. Because one of the key things we struggle with is, anyone can say, 'well, Treasury wouldn't know"."
"The other key thing that has really changed is the interaction between us and boards is quite different now than it was even two years ago. We are working really closely with chairs and whole boards to think about the performance of their entities so that is quite different from a quarterly monitoring cycle that we used to do."
"If we have a system that just relies on ministerial decision making at the end of things, then that's only one lever. We are actually really focused now on board performance, quality of board performance and linking board performance to actual strategy of the entities. You get a better system if you have boards who are making the right calls at the right time, and if we did that with Solid then we wouldn't be in this situation that we are in now."
Guardians of the NZ Superannuation Fund Chair Gavin Walker and CEO Adrian Orr will appear before the Commerce Committee in Parliament after 11.30 pm.
Tweets of the day:
Goodness. @AndrewLittleMP just described Steven Joyce as "agile and nubile."
@CTrevettNZH @AndrewLittleMP pretty sure this tweet breaches Twitter's standards
@toby_etc @AndrewLittleMP because it borders on blasphemy to describe the Master of the Universe in such a fashion?
@CTrevettNZH @AndrewLittleMP under the "making people vom a bit in their mouths" provision