KEY POINTS:
Finance Minister Michael Cullen felt the force of a political and public backlash yesterday after he openly mused about the merits of levying home mortgages to help fight inflation.
Dr Cullen's surprise comment that the levy was "worth further investigation" came during a Radio New Zealand interview.
The
levy could help the Reserve Bank's monetary policy decisions to have more effect - at the moment fixed-rate mortgages are dulling the impact of central bank interest rate moves.
It was floated as an idea in a Reserve Bank and Treasury report last year.
But Dr Cullen's comments yesterday caught Labour's confidence-and-supply partners United Future and New Zealand First off guard and the levy was dismissed as highly unlikely to ever happen.
Aside from being unpopular with the large chunk of voters who have mortgages, changes in the area of monetary policy are generally made with wide political support - something the levy lacks.
United Future leader Peter Dunne, who works alongside Dr Cullen as Revenue Minister, was scathing of the proposal.
"At first glance, this sounds like a 21st-century version of Sir Robert Muldoon's disastrous attempts in the early 1980s to control interest rates," he said.
Mr Dunne's office was also surprised to discover Dr Cullen invited National's John Key and Bill English to a meeting late last year to talk about alternatives to existing monetary policy tools to tackle inflation.
The meeting, understood to have also included Reserve Bank Governor Alan Bollard, was disclosed yesterday by Dr Cullen as he responded to criticism of the mortgage levy comments.
Mr Dunne said he "certainly" had not discussed the mortgage levy proposal with Dr Cullen.
NZ First leader Winston Peters described the mortgage levy idea as "crude" and "unfair".
The levy "should not be preferred over much sounder policies to achieve lower interest rates and higher savings".
Mr English said Dr Cullen should sort out his "high-taxing, big-spending policies" before he levied a new tax on mortgages.
Dr Cullen's office moved quickly to dampen down the mortgage levy talk, which threatened to overshadow the Finance Minister's first major speech of the year.
Auckland Chamber of Commerce chief executive Michael Barnett said many businesses used their houses as guarantees for loans. "The possibility of Government burdening them yet again with a cost, I would say they would not be happy," he said.
Auckland financial adviser Jack Singh said 25 to 30 per cent of mortgages he advised on were home loans for business purposes.
- additional reporting Bernard Orsman