Sometimes you have to be in a ringside seat at a big fight to really understand what it's like. Hearing and seeing the thwack of a knockout punch while you watch the sweat fly is always better than watching it on television or reading about it in a newspaper.
Luckily for New Zealand, Reserve Bank Governor Graeme Wheeler is now our banking regulator and he had a ringside seat when a housing crash in the United States almost knocked out the global financial system. Wheeler was the head of operations at the World Bank in Washington from 2006 to 2010, so he no doubt saw the sweat fly in those dark months in late 2008-09, when the global economy was brought to the brink of collapse.
This explains his determination to avoid the same thing happening here, and why he has pushed ahead this week with a "speed limit" on high loan-to-value ratio (LVR) loans.
He has had to fight against the surprisingly public and heavy political pressure from Prime Minister John Key and the squeals of outrage from bankers, first-home buyers and travellers.
He has also had to overcome a decades-old internal culture at the Reserve Bank that is reflexively against dictating to bankers how much they should lend and to whom.
I say bravo to Wheeler for sticking with his instincts forged during the crisis of 2008-09. It should not be forgotten that our Reserve Bank also had to make more than $7 billion worth of emergency loans to our own "too big to fail" banks between October 2008 and April 2009 as house prices fell more than 10 per cent.
He has had to fight hard and right from the start. Unfortunately for him, he arrived just as the banks were pushing down hard on the accelerator of mortgage lending.
Wheeler's term began on September 26, just a month before ANZ integrated National Bank and unleashed an almighty dash for market share in the Auckland mortgage market, as other banks tried to poach customers unsettled by the integration of brands and computer systems.
ANZ and ASB went at it hammer and tong for months, offering free televisions, thousands of dollars worth of cash-back deals and waiving low-equity premiums to first-home buyers and others wanting high LVR loans.
By November 7, when Wheeler held his first press conference, it was clear this surge of lending was the spark that could set alight an Auckland real-estate fire smouldering with capital inflows, migration and a lack of housing supply. He sensed it, but five weeks into the job he wasn't willing to slam on the speed limits without more evidence of a housing boom: "Even if we had the ability to use that instrument at this point in time, it's not something we would seek to be exercising at the current time."
But lending and house prices were taking off in our most crowded and auctioned city. Auckland's house price index rose 16.6 per cent in the six months after that conference. Wheeler has moved six months too late, but it's better late than never and he should be congratulated rather than badgered and harped at.
Anyone with any doubts should read Wheeler's speech this week, in which he shows how New Zealand's house prices are more over-valued than in the US, UK, Australia and Ireland, and how our household debt is now higher relative to our GDP than the US, Australia and Greece.
That thwack of a housing bust hitting our economy is something no one wants to see up close, but I'm glad our Reserve Bank Governor has.