Finance Minister Bill English said the Government was looking at housing in much the same way as previous administrations had focused on reform of other parts the economy, such as electricity.
English, in a speech to the Auckland Chamber of Commerce yesterday, said the Government spent $2 billion a year on accommodation subsidies, adding that about 60 per cent of rentals are Government subsidised. In addition, one in 16 Auckland houses are government-owned.
"Housing is our biggest asset class and our biggest market, with housing stock worth eight times the share market," English said.
Over the past 25 years New Zealand had gone through extended processes to reform the electricity, telecommunication and financial markets.
"In each case it took years to understand the impact of existing rules, and how to change them to achieve a more efficient market," he said. "Now we are addressing housing in the same way."
English said there was no "quick fix" to Auckland's housing shortage but that the Government could spend money to deal with the population growth.
He said the Government was focused on rapidly rising house prices for three reasons because they can a significant effect on the macro-economy and financial stability.
When house prices skyrocket, Government housing services and subsidies become more expensive.
"Lack of land supply, and hence higher prices, occur when the planning system isn't working properly," he said. "We want a planning system that recognises the consequences for all current and future residents, and for the country."
English said Government development projects were expected to deliver at least 10,000 houses by 2020.
Commenting on the economic outlook, English said there were positive signs despite international turbulence.
Exporters who were forced to become more efficient when the exchange rate was around US88c were now able to reap the rewards of a much lower exchange rate.
Treasury forecasts economic growth over 2016 and 2017 will average over 3 per cent, better than most countries New Zealand is often compared to, despite "some ongoing wobbles" in the global economy.
"Uncertainty remains around the impact of US interest rate hikes, China's rebalancing path looks rocky, and risks around European banks are becoming more apparent," he said. At the same time, central banks around the world were grappling with very low inflation.
"There is a lot of uncertainty about exactly what is keeping inflation so low, and the implications for our economies," English said.
Markets were reflecting anxiety that economies with zero or negative interest rates can't rely on central bank interventions.