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Q+A: Peters: Change Reserve Bank Act

Peters: Change Reserve Bank Act

New Zealand First leader Winston Peters told TV One’s Q+A programme that his top priority ahead of the Budget would be to change the Reserve Bank Act.

WINSTON Number one, I’d change the Reserve Bank Act to reflect that we are as much now as we ever were an export-dependent economy. We’ve been there since—

CORIN That would mean lower interest rates, effectively?

WINSTON Well, yes, you lower interest rates effectively. But you do not allow the sort of bench speculation that comes from that to happen.

Winston Peters also told the programme ‘there’s a day of reckoning coming for us, sad to say.’

“a lot of those people in Auckland are about to lose their equity in their homes as they did in 2007 and 2008 when the market collapsed…

Now, a wise government would step in and try and stabilise things, cut back on demand, stop offshore buying. Second thing is cut back on this massive immigration – which is not about production, remember this; it’s about consumption.”

When asked whether he would legislate to force land bankers to give up their land, Mr Peters said, “Hong Kong does. Hong Kong says, “Oh, yes, you can come in and you can land-develop. But if you don’t develop off the plans you gave us with the permission you asked for, within two years, bang. You’ve lost those rights.” But we won’t, as a parliament, take any steps at all, because we’re too scared of what you might call “unbridled capitalism in this country”, which is not working for about 90% of New Zealanders.”

http://tvnz.co.nz/q-and-a-news/state-govt-s-books-peters-video-6314234

Q+A, 9-10am Sundays on TV ONE and one hour later on TV ONE plus 1. Repeated Sunday evening at 11:35pm. Streamed live at www.tvnz.co.nz

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Q + A
Episode 12
WINSTON PETERS
Interviewed by CORIN DANN

CORIN Let’s go to the New Zealand First leader and former Treasurer, Winston Peters. Good morning to you, Mr Peters.

WINSTON Good morning.

CORIN What do you make of what the Reserve Bank has done this week? It’s pretty extraordinary stuff, isn’t it?

WINSTON Well, it’s actually quite sad to see someone so intelligent and so experienced tearing his hair out about a problem that his industry or his bank is part of. But it’s not quite his fault – it’s the Reserve Bank Act itself. So you’ve got a huge bubble building here in Auckland in particular. It’s going to burst one day, perhaps not too far from now. That’ll also be a calamity for the economy at that point and time, because international banks will be worried about us as well. But it comes down to some pretty basic fundamentals. It isn’t rocket science to say it’s the law of supply and demand, beloved of certain people in politics in this country. If you rark up a demand like we have and massively fail to supply, you get what we’ve got going now, particularly in Auckland.

CORIN So what can be done, though, bearing in mind that the government is working on supply as fast as it can – to give them some credit on that score – but has been reluctant to deal with demand? What can be done in the short term to fix this problem and prevent that bubble?

WINSTON No, it’s not working on supply of houses at all. It’s not just this government. The past governments in recent decades have not either – haven’t for about 30 years. Look, it is said that we need 13,000 new houses a year in Auckland. The supply over the last three years has been dramatically less than half of that. And then just to exacerbate that demand, you’re allowing offshore, non-resident buying. And you’re allowing a massive immigration influx into Auckland which will need that number of houses all to themselves without any mobility from rural New Zealand to Auckland, or for example, the natural growth of Auckland. They are not doing what they are claiming.

CORIN So what would you do?

WINSTON Well, we would build houses like we used to – at the base level – for people to get a start. You’re talking about the Bank of England over there. Those English aren’t paying what we’re paying in interest rates. Ours, comparatively to the rest of the world, and if money is an international commodity, we are paying the highest interest rates in real terms, comparatively, than most any country in the world, perhaps. Now, when you look at what we would do -- you’ve got to have a land bank. The government has to provide land banks itself. You can’t let offshore developers, in particular, park up around the outskirts of Auckland and just wait.

CORIN So would you force the land bankers to give up that land?
You’d actually legislate to take it off them?

WINSTON Hong Kong does. Hong Kong says, “Oh, yes, you can come in and you can land-develop. But if you don’t develop off the plans you gave us with the permission you asked for, within two years, bang. You’ve lost those rights.” But we won’t, as a parliament, take any steps at all, because we’re too scared of what you might call “unbridled capitalism in this country”, which is not working for about 90% of New Zealanders.

CORIN Scared of that or scared of upsetting China? Because that is where our trade links have grown so much lately. Do you think this government is scared that if it puts in restrictions on foreign investors – and while that would obviously apply to all nationalities – the Chinese may take offence at that?

WINSTON Well, that's true. But you see, Australia did. Hockey, the Treasurer over there, stepped in and said, “We’re coming for you if by October you have not declared the honest truth behind all your buying in Australia.” Now, if Australia can do that, Why can’t we? But you’re right; they are scared. They’re cravenly hobnobbing internationally without having the understanding that the number one economy they should be worried about is ours.

CORIN You actually talked about this too when Labour was in power. They were quite comfortable to sit back and watch house prices rise, have a consumption-driven boom. We’re seeing a similar thing now in Auckland under this government. Do you think it’s just that politicians, when they get into power, they see Aucklanders feeling wealthy, they don’t want to stop that?

WINSTON Well, they might feel wealthy, but there’s a growing number of people in Auckland that are fighting for their existence. Elderly people who--

CORIN But 500,000 people own houses in Auckland. Those 500,000 are getting wealthier by the day just by doing nothing. The politicians don’t want to lose that powerful group of voters, do they?

WINSTON Well, that’s a smoke-and-mirrors exercise. But come back to this – a lot of those people in Auckland are about to lose their equity in their homes as they did in 2007 and 2008 when the market collapsed. You’ve got to remember this – we invented the term “South Sea bubble”. But it’s coming at such velocity these days. The cycle used to be 30, 40, 50 years. Now it’s been every seven years, and we are facing the same again. Now, a wise government would step in and try and stabilise things, cut back on demand, stop offshore buying. Second thing is cut back on this massive immigration – which is not about production, remember this; it’s about consumption. And every housewife or any male doing his responsible job, going outside the house to keep the family going, knows if you spend far more than you earn, then there’s a day of reckoning. And there’s a day of reckoning coming for us, sad to say.

CORIN What makes you so—?

WINSTON Look, manufacturing is down against GDP. Exports are down against GDP. The balance of payments deficit’s going the other way. We’ve got a massive dependence on foreign money, and you’ve got concerns from foreign banks. One last thing – when the Aussie banks, the four of them, earn about the same in profits every year as the rest of our stock exchange, I kind of think it’s about time you got worried.

CORIN What makes you so sure, though, that there is going to be a collapse any time soon in Auckland’s housing market? If you look at the— It is a desirable place to live. People want to go there. There is enormous demand because it is a good place to live. That’s what’s driving it. The fundamentals are.

WINSTON No, no, no. No, look, all around the country— No, the fundamentals are all wrong. Why have you got some of the highest export wealth creating towns in this country – the Gisbornes, the Whanganuis, the Whangareis, for example, now the New Plymouths – all up in arms? Because you’ve got a two-tiered economy, where those who create the real wealth to bring back for the family, New Zealand, are side-lined, and the preoccupation is with Auckland. Why? Because you might get a job in Auckland. But there’s no regional-development strategy; there’s no plan. There’s just what you might call heroic optimism and charm going on. But it’s starting to bite now, and more and more people out in the provinces are saying, ‘Good God, we can’t go on this way, because things are getting worse for us. There’s no return for us who create the real wealth that any economy needs, namely exports.' There’s no shortcut to this.

CORIN What would you do in the budget? Give me some sense of— If you had a couple of top priorities, what would they be? What would they be?

WINSTON Number one, I’d change the Reserve Bank Act to reflect that we are as much now as we ever were an export-dependent economy. We’ve been there since—

CORIN That would mean lower interest rates, effectively?

WINSTON Well, yes, you lower interest rates effectively. But you do not allow the sort of bench speculation that comes from that to happen.

CORIN So you’d have to clamp down harder on Auckland if you did that, though, wouldn’t you?

WINSTON You wouldn’t be clamping down hard on Auckland. The one thing you would be able to do for Auckland is to say to them, ‘We may be able to preserve the equity you have in your homes.’ But the biggest worry of people watching this television this morning should be not ‘how much my house has risen in price’ – ‘Is my share of it when the thing is regularised or when things are stabilised?’

CORIN But this is interesting. Your number one priority would be to change the Reserve Bank Act.

WINSTON Well, you know why? Because how do you think our country survives? It’s not by consumption. We’ve got 3.4% growth. No one’s calling it a rock-star economy any more, because when you dissect what it means – Christchurch earthquake, massive immigration to Auckland, massive consumption in housing and house prices – where is the real wealth here that will sustain us—?

CORIN So when the government comes out with its top priority, which seems to be child poverty, hardship, you’re saying that that’s misplaced?

WINSTON Oh, look, with the greatest respect, when do we stop, sort of, laughing when they say their top priority is child poverty? It has never been. If you want to deal with child poverty, you take the fundamentals of family income and make sure they can live on it. I mean, that’s how we built this great society, one time, where we had no unemployment, where everybody – where I came from – everybody had a job. In fact, only 29 – not 1000 or 100 – 29 people were registered unemployed. Today we’ve got employment figures— I’ll give you the classic example. I came to the Northland by-election, and Mr Steven Joyce is up there, saying, ‘We have created 72,000 new jobs in Northland.’ Now, think about it. That is so preposterous, when in Parliament he was saying, ‘We’ve created 175,000 across the country.’ 72,000 in one place, called Northland, and every other electorate gets the rest, about 120,000? In short, it was humbug, and still humbug, because one hour in a job a week makes you employed under those figures.

CORIN Mr Peters, I’m sorry to cut you off there, but thank you very much for your time on Q + A this morning.

WINSTON You’re welcome.

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