Everyone who cares about the future of the economy, interest rates and house prices needs to circle two dates in their calendars this year.

The first is August 19.

That's the deadline for the Auckland Council to approve the Unitary Plan presented to it by the Independent Hearings Panel.

This sounds like the most boring thing on the planet, but this set of zoning maps and planning rules will set up Auckland to handle (or not) its growth for at least the next 20 years.


The councillors, who will by then be in the final stages of elections set to finish on October 8, will have to decide whether to accept whatever is recommended, or reject some or all of it.

Auckland and the nation got a taste of how intense that debate might be in February, when homeowners from the eastern and northern suburbs shouted down renters from the southern and western suburbs who wanted a denser set of zoning rules for the leafy suburbs that would have allowed the building of affordable three-storey apartments.

Councillors voted 13-8 with the old leafy-suburb dwellers that night to withdraw those zoning rules because they knew homeowners vote in council elections and renters don't.

It wasn't a good omen for those aspiring homeowners and the rest of the economy desperate for Auckland to solve its chronic and growing housing shortage.

Anyone doubting the wider significance of this decision on August 19 needed only to listen to Reserve Bank Governor Graeme Wheeler and Finance Minister Bill English this week.

Doug Sherring
Doug Sherring

They referenced this decision in their hopes, dreams and fears for Auckland housing supply and the economy's long-term future.

English was challenged again on whether the Government would intervene if the council voted down proposals to allow the city to grow up and out.

He was careful not to talk about appointing commissioners to run Auckland from Wellington - but the threat hung heavy in the air above his words.


"We may have the need to do that when the Auckland Unitary Plan comes through, because it's pretty important that plan enables enough supply to meet demand," he said.

No pressure then.

The second date to circle is November 30, when the Reserve Bank's next half-yearly Financial Stability Report is due.

It is expected to spell out details of new British-style debt-to-income ratio limits. In October 2014, the Bank of England limited the amount of mortgages worth more than 4.5 times income and now the Reserve Bank is looking at introducing something similar here. This could have a substantial effect.

Graeme Wheeler. Photo / Mark Mitchell
Graeme Wheeler. Photo / Mark Mitchell

Wheeler is worried that Auckland is taking off again and he is also concerned about the inflation now spreading into the provinces. He could choose to adopt a blunt limit of five times income for everyone.

The Reserve Bank helpfully included a chart in this week's report that showed around 35 per cent of owner-occupiers and 60 per cent of investors had borrowed more than 5 times their income.

Such a tool would give the Reserve Bank more flexibility to cut the Official Cash Rate, knowing that it would be less likely to pour more fuel on the Auckland fire and spread up and down the country.

Wheeler was careful not to link the result of Auckland Council's August 19 decision to what he does on November 30 but it's a fair bet he will be watching closely.

The rest of New Zealand will be watching closely on those dates, too.

The results have the potential to dampen house price inflation, cut interest rates, reduce the currency and limit mortgage lending - or vice versa.

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