The kiwi dollar soared to a new high of more than two years in the Asian session after the New Zealand government reportedly was reviewing housing market-related policies and seeking advice from the central bank on how it could help stabilize property prices.
Finance Minister Grant Robertson has written a letter to the Governor of the Reserve Bank of New Zealand (RBNZ), Adrian Orr to seek advice and propose to consider amending bank transactions to include house price stability as an important factor in monetary policy.
The news has pushed the New Zealand dollar to a new high since June 2018 as it reinforces expectations that the central bank will not lower interest rates negatively next year.
According to Robertson, with low interest rates, and before housing supply can meet demand, this is the time to consider how the central bank can contribute to the stability of the housing market.
This is because, house prices have soared due to declining loan costs, exceeding market expectations that house prices will fall during the coronavirus pandemic crisis.
Westpac Bank predicts that house price inflation will increase to 15% in June 2021, and prices will rise 13% overall next year.
Meanwhile, Robertson also told Governor Orr that housing price instability will affect the government's goal of reducing inequality and poverty.
