The Reserve Bank has announced new lending restrictions targeting Auckland property investors as it looks to take the heat out of the property market in the country's biggest city, which it sees as a key risk to the nation's financial system.
The bank intends in October to introduce new 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, it said in its six-monthly financial stability report.
Labour's finance spokesman Grant Robertson said the unprecedented measures showed the Reserve Bank understood the risks of Auckland's housing market - unlike Prime Minister John Key.
"The [Reserve] Bank is right to take action to curb speculation, but the Government's refusal to tackle foreign speculators gives them a free hand."
Mr Robertson said LVRs already in place had benefited overseas buyers and today's announcement would mean foreign speculators would face even less competition.
"This ... shows the ludicrous situation where a central bank wants to tackle a major issue that the Government is ignoring. The Government must fix this looming loophole ... National can't keep delegating housing policy to the bank."
Mr Robertson said the governor had highlighted other major risks to financial stability including falling dairy prices and the peak of the Canterbury rebuild.
"This is compounded by National's failure to invest in diversification in the economy ... National is out of touch and out of ideas. The Reserve Bank's actions show we desperately need a Government willing to take action," Mr Robertson said.
Mr Robertson told the Herald he was not holding his breath on any meaningful action from the Government.
"Quite clearly there needs to be a package of measures to deal with speculation. Whether or not a full-blown capital gains tax is the way to do that, we are currently reviewing our policy.
"But what we do recognise is that tax incentives or disincentives are part of that package. Exactly what that looks like is what we are working on now."
Mr Robertson said the Reserve Bank was "not pinning its colours" to any particular tax vehicle.
"We went to the last two elections with a capital gains tax, and we have undertaken to review that. But no one should mistake the fact that there is an issue here about speculation that needs to be dealt with.
"The supply issue also still needs to be worked on, particularly the availability of affordable housing."
Green Party Co-leader Russel Norman said the Reserve Bank had taken what action it could, but much more was needed from the Government.
That included a capital gains tax excluding the family home, restrictions on foreign buyers, and increasing or supporting the supply of high-quality, high-density urban development.
"The Reserve Bank is using what tools they have to try and deal with this out-of-control housing crisis in Auckland. They are just responding to the disaster because central government won't," Dr Norman said.
"Effectively the rules now in place in our country mean it's harder for New Zealand residents to buy investment property in Auckland than it is for foreign residents.
"It is also worth noting that two of the three systemic risks to financial stability as identified by the Reserve Bank, Auckland house prices and dairy debt, are encouraged and subsidised by this Government's policies. As well as their disastrous housing policies, National has subsidised dairy's water, greenhouse emissions and irrigation."