Budget 2014: Building products tariffs lifted temporarily

Aerial photographs of Stonefields Mt Wellington, Auckland. Photo / Richard Robinson

Finance Minister Bill English has defended today's modest Budget measure to trim the cost of new homes as one step in a larger programme to improve home affordability.

However he said the most significant feature for helping New Zealanders into their first home in today's Budget was the Government's focus on limiting spending to levels that would not drive up interest rates.

The sole new home affordability policy today was the temporary suspension of tariffs and duties on building products which the Government said would reduce the cost of a standard new home by about $3500.

Mr English said the move was temporary due to technicalities of relevant legislation but the Government would ultimately like to make it permanent.

Video: Budget 2014: Brian Fallow's analysis

He defended it as "another step yet a significant one" in what he said had been a three year programme which would run for a further five years, "to allow more New Zealanders into a housing market where they're shut out mainly by poor planning."

But Mr English said the biggest factor affecting home affordability was interest rates.

"The best thing that Government can do is limiting its own spending to take pressure of those rates."

He warned a Labour Greens Government with less disciplined spending could push interest rates to over 10 per cent, which for those wanting to buy their first home, meant "their dream is dead".