It was fascinating watching the Prime Minister spinning her way through the latest news on house price inflation this week.
On the back of a 20 per cent annual increase in median house prices she indicated lots of concern. But she stopped short of identifying any culprits or any new solutions to what is now clearly an asset price bubble that bears little relationship with what is happening in the real economy.
It is interesting how far the current government's rhetoric has come since opposition days when housing was "in crisis" and people with "Chinese-sounding names" were preventing "normal" kiwis from buying houses – but I suppose that's politics.
The accepted culprits in those halcyon days were immigration pressures and councils restricting land supply – and there was some truth in both.
Land supply around Auckland was a big issue because of highly restrictive urban plans that prevented building up, and the old Auckland Regional Council's metropolitan urban limit, which was designed to stop the city spreading out. The effect was ridiculously low numbers of houses built in the first decade of this century, followed by a Royal Commission and a merger of all the local councils in an attempt to break the deadlock.
The biggest step forward on housing supply in Auckland came with the new, much more permissive, Auckland unitary plan. Although it was put in place in record time, it was still a frustrating five years from start to finish.
Since 2015 however, Auckland house building has taken off, which has left the Ardern Government nothing much to do except claim the credit and start the ill-starred "Kiwibuild" programme that petered out under its own policy contradictions.
The government does need to keep pestering councils to zone more land for houses, and expand further the Housing Infrastructure Fund, which funds civil works to enable big developments in places like Drury South and Wainui, and Peacocke in Hamilton.
It also needs to better coordinate transport developments to facilitate housing growth. But much of the heavy policy lifting on land supply around our biggest city has been done. And there's not been a land supply issue in many of the regions around the country with the biggest house price increases, except Tauranga and Wellington.
Thanks to Covid-19, immigration is also not the housing demand driver it once was. When our economy was booming people wanted to come here and we needed them to fill the jobs.
That dynamic has changed, mostly because of the pandemic. Despite the Kea network's rosy view of the number of New Zealand expats returning home, our immigration statistics tell a blunter story about the effects of closed borders.
Since April we have had a net gain of only 2500 people. That's down from around 20,000 in a normal year.
That leaves only one major suspect for the current super high house prices, ultra-low interest rates. These work in two ways with housing. People can afford the repayments on a bigger mortgage so they bid up the sticker price on the house, while others look for any sort of asset yield that's bigger than the derisory amounts available from bank deposits.
There is now much more recognition that ultra-low interest rates are driving high asset prices including house prices, but so far much less will to do anything about it.
The Reserve Bank Governor this week shrugged his shoulders and more or less said it wasn't his problem. In short his view was forget house prices, our mandate is unemployment and aren't we doing well. And to a degree he's right. The current government added full employment to the Reserve Bank's mandate of low inflation so he has to prime the pump more to get employment up.
Making employment the responsibility of the central bank is something I have always viewed as a mistake, not least because it allows the government of the day a free pass on its own policies that might restrain employment growth, leaving the Bank to use monetary policy to try and clean up any mess.
Covid-19 is the big driver of the current economic recession, but the government's policy response isn't helping.
By continuing to invoke lockdowns at the drop of a hat, mandating big minimum wage and public sector pay increases, pursuing the adoption of the so-called living wage, increasing holiday pay and pushing myriad other anti-employment measures, there is no doubt that the economy will respond with more sluggish employment growth than would otherwise be the case.
In turn monetary policy has more work to do to maintain progress towards the full employment goal. Say hello to even lower interest rates for longer; and ever more nonsensical asset prices, especially houses.
It is a big irony that government policies that often seek to boost the fortunes of the low paid end up helping to trap them in a hand to mouth existence, with no way to break the cycle and get on the home ownership ladder.
It would have been great to see the Reserve Bank Governor this week ask for more help from the government in terms of pro-growth policies that would over time reduce the need for highly unconventional monetary policy.
It would have been great too for the Prime Minister to signal that she won't stay completely reliant on the Reserve Bank to solve these big and growing economic imbalances. But neither happened, which is sad for the lower paid.
The simple fact is that under current policy settings, micro-economic policies that attempt to artificially boost incomes beyond what businesses and the economy can afford will simply end up driving a bigger wedge between the haves and the have nots in terms of asset prices and wealth, through the mechanism of ever lower interest rates. We are chasing our tails.