Reserve Bank decision will increase cost of living

Increased capital requirements for banks could increase the cost of living for families with a mortgage by an average of $1900 a year and also reduce returns for savers, National’s Finance spokesperson Paul Goldsmith says.

“The Reserve Bank estimates their bank capital decision will increase interest rates by 0.2 per cent, while others estimate it could be much larger, as high as 0.8 per cent.

“A 0.5 per cent increase in interest rates would increase the cost of servicing the average mortgage in New Zealand by $1900 a year, or more than $35 a week

“If the increase in interest rates is closer to the upper range of 0.8 per cent, then it would increase the cost of servicing the average mortgage in New Zealand by $3100 a year, or nearly $60 a week.

“This will hurt Kiwi households who are already struggling with a rising cost of living because of a Government that has piled on more taxes and costly regulations.

“Under this Government, rents are up almost $50 a week, new and increased petrol taxes have driven up the cost of filling up the car, thoughtless decisions like the oil and gas ban will flow through to higher electricity bills and there is no sign of tax relief after the Government cancelled tax cuts that would have benefited the average earner by $1060 a year.

“The Minister of Finance should have been much more forceful in insisting on an earlier, public cost-benefit analysis from the Reserve Bank so independent analysts and economists could critique their analysis before the final decision was made.

“The Minister of Finance’s passive approach to this issue is consistent with a Government that has been complacent about our economy.”

Notes to editors:

The calculation of the average increase to the cost of servicing a mortgage is based off average house price data from QVNZ and assumes a 20 per cent deposit, 30 year-term.

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