Rate rise not needed if Govt was doing its job - Labour

Today’s interest rate rise wouldn’t have been necessary if the Government had been doing its job properly and targeting the sources of inflation, Labour says. "New Zealand interest rates are among the highest in the world, putting more and more pressure on our exchange rate to the detriment of exports," Finance spokesperson David Parker says. "Not only that, today’s rise to 3 per cent is another blow for middle New Zealand. It will add an extra $70 a month to a $500,000 mortgage or $50 a month to a $300,000 one, on top of last month’s increase. "With the Reserve Bank tipping interest rates to go to 8 per cent this is going to cause real pain for home owners and will make the dream of home ownership unattainable for many more Kiwis. "The Government has dropped the ball on this. It could have been doing so much more. We will, and will be releasing details of how we will go about that next Tuesday," David Parker said. Housing spokesperson Phil Twyford said it was predicted this week that interest rates could peak at a level which would see first-home buyers in Auckland spending two-thirds of household income paying the mortgage. "We have had five years of out-of-control house price increases which have seen the average Auckland house rise over 40 per cent while National has been in government. "National’s failure to get a grip on the housing crisis - its refusal to tax speculators or build large numbers of new homes - is one of the reasons the Reserve Bank wants to put interest rates up. Low interest rates caused by the Global Financial Crisis, and the lack of demand in the economy, were the only thing good thing National could point to. Now you can add rising interest rates to steeply rising prices, and LVRs shutting out first home buyers," he said. David Parker said Labour’s Kiwibuild policy, its capital gains tax, controls on foreign ownership, and providing the Reserve Bank with more tools would stabilise inflationary pressures and mean that today’s actions were not necessary. "NZ interest rates are already higher than the rest of the developed world. Despite dropping export prices our exchange rate is going up with continuing job losses in export industries like forestry. Something has to change," he said.