It is being referred to as the "no surprises" Budget and it was no surprise to hear yesterday that Finance Minister Bill English will address the issue of the overheated Auckland property market when he makes his annual speech to Parliament on Thursday.
The Government and the Reserve Bank havebeen coming under fire recently for not doing enough to cool that city's rampant market without negatively affecting the rest of the country.
Last week the central bank indicated that it intends in October to introduce new loan-to-value ratio (LVR) limits on lending to property investors in the Auckland council area that would require those borrowers to have at least a 30 per cent deposit.
Yesterday Prime Minister John Key announced that as part of the Budget package, the Government would introduce a kind of capital gains tax. There are some exemptions. At present capital gains are taxed if the Inland Revenue Department believes it was the intention of the seller to make a capital gain on a property.
The Government also plans to introduce new disclosure rules to give it information about who is buying property - residents or non-residents.
Clearly the Government wants to do something about the Auckland property market and, in particular, wants to be seen to be doing something.
Whether or not these measures will be enough to put the brakes on remains to be seen. However, it is important for the Government to ensure that these measures do not have an adverse effect on the rest of the country.
The Auckland situation needs to be dealt with appropriately but the economy of the regions, especially Hawke's Bay, simply cannot afford anything that stymies growth.
