New Zealand’s central bank said it would revise its stance on interest rates if rising demand for property, particularly in Auckland, stokes a damaging housing boom, Deputy Governor Grant Spencer said.
“If the house price and credit expansion begins to fuel excessive consumption spending and inflationary pressures, a monetary policy response would become more likely,” Spencer said in a speech to business leaders in Auckland. “The Reserve Bank’s flat interest rate outlook in our recent monetary policy statement would need to be revisited.”
The New Zealand dollar pared declines after the speech, trading at 84.23 U.S. cents as of 4:54 p.m. in Wellington, after touching 84.06 cents earlier today, from 84.32 cents on April 5. Interest rates have been at a record low 2.5 percent since March 2011. In Auckland, home to about a third of New Zealand’s 4.4 million people, house sales and prices rose to a record in February, Barfoot & Thompson, the city’s largest realtor, said last week.
“There are escalating demand pressures in the Auckland market, particularly arising from low interest rates and an easier supply of credit,” Spencer said. “It is important that these pressures moderate in order to avoid a destabilizing overshooting of house prices while additional supply is gradually brought on stream.”
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