Failure to heed Reserve Bank’s words on possible crisis plain irresponsible.

When the Deputy Governor of the Reserve Bank issues a warning that the speculative boom affecting the Auckland housing market must be arrested in case it sparks a financial crisis, the Government should first sit up and take notice - then act.

Grant Spencer put the central bank's warning in the context "that an eventual market correction is likely to be disruptive to financial stability and the economy".

Spencer wants the Government to tackle the preferential tax status that residential property investors have, which has been interpreted as bringing in a capital gains tax.

A brutally designed tax - applied annually and/or retrospectively when a house is sold - could help puncture the boom. Other options include removing tax deductibility for mortgage interest for investors with multiple residential houses; forcing them to hold investments for 10 years or more or lose all tax preferences, or reintroducing commercial interest rates for landlords.

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Typically, John Key has resorted to yet more excuses for inaction. A capital gains tax is hard to design, is hideously complex and there are ways around it ... We've heard this refrain for years.

Andrew Little has also backed away from capital gains taxes because they are politically deeply unpopular.

What they should do is show joint leadership. Forget the voters - there's no election until 2017. Instead just get together, form a political accord on a range of immediate actions, and pass legislation.

In truth, the speculative boom has driven massive increases in wealth over the past few years for those who are invested in the Auckland residential housing market either as householders or landlords.

But too many first-home buyers are priced out of the Auckland market; others have absurd debt levels where their equity will be at risk if a market correction occurs, or where they will find it difficult to keep up mortgage payments if interest rates go up (as they will at some stage), or there is a shock to the economy that puts their jobs at risk.

It really has come to a pretty pass that it now takes the Deputy Governor of the Reserve Bank to forcefully remind the Government of its responsibility. Many in the body politic - including Finance Minister Bill English - have come through the era when politics and bureaucrats used to chant the "monetary policy needs mates" mantra as a reminder to Governments to act responsibly on the fiscal front. They should now reflect that monetary policy also needs mates when it comes to corralling the housing market.

We have had times in New Zealand's history where major crises have roiled the economy.

The Global Financial Crisis was built on the back of the explosion in sub-prime lending and uncontrolled financial engineering.

The New Zealand economy has recovered from the GFC. But the Government has yet to post a Budget surplus and is still accumulating debt.

This reality suggests prudent politicians would shore up New Zealand against the risk of a major market correction which also has big implications for the financial system.

New Zealand has a history of blinkered politicians. Both Key and English were young men when the 1984 devaluation crisis occurred.

But comments from the Prime Minister on Spencer's warning coupled with his blithe dismissal of the fact that English may not now post a Budget surplus in the short term do give rise for concern.

The late Sir Robert Muldoon used to boast that New Zealanders "wouldn't know a deficit if they fell over it".

That was back in the time when a wilful National Prime Minister ran crippling deficits and borrowed to the point where Japanese bankers wanted usurious interest rates and other banks cut credit lines when they were approached for more funds in the lead-up to the 1984 election.

It was a precarious time in our financial history. But the history books show Sir Robert repeatedly ignored his advisers' advice.

From 1982, he was urged by the Reserve Bank and the Treasury to devalue the dollar by at least 15 per cent. The run on the dollar during the election was predicted by Muldoon's advisers.

Labour's Sir Roger Douglas was also well aware of the advice. Back in 1984, it was then Deputy Reserve Bank Governor Roderick Deane who pushed for Government action.

Thirty years on, another Deputy Reserve Bank Governor is warning of a potential crisis. It looks as if history's lessons have not been learned.

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