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WELLINGTON, June 15 The Organisation for
Economic Co-operation and Development (OECD) warned New Zealand
on Thursday that low labour productivity poses long-term
challenges for the country despite its solid growth prospects.
The Paris-based OECD, a rich-country think tank, also backed
the Reserve Bank New of Zealand's proposal to add debt-to-income
limits on home loans to its policy toolkit amid concerns over
high household borrowing and rising house prices.
OECD Chief Economist Catherine Mann said New Zealand's
robust economic growth was "enviable", but stressed the need to
tackle labour productivity that lagged its OECD peers.
"Improving productivity growth is a major long-term
challenge for improving inclusiveness and living standards,"
Mann said in a report.
The OECD is projecting slightly weaker growth than the New
Zealand government, allowing for differences in the forecast
The OECD saw growth at 3.1 percent for both 2017 and 2018
calendar years, while the New Zealand government has forecast
growth of 3.7 percent for 2017/18 and 3.5 percent for 2018/19.
New Zealand's statistics agency said on Thursday the economy
grew by 0.5 percent in the three months to March. The number was
lower than the 0.7 percent growth forecast in a Reuters poll of
economists and well under the central bank's forecast for 0.9
The OECD said the New Zealand government should reduce
barriers to foreign investment, lower the corporate tax rate and
introduce research and development tax credits to tackle low
Mann told reporters at a briefing in Wellington that
debt-to-income limits on home loans would need to be deployed
carefully, but could help ease pressures in New Zealand's strong
housing market that pose systemic risks.
"House price-to-income ratios being at this highly elevated
level warrant some concern," she said.
The Reserve Bank of New Zealand (RBNZ) said earlier this
month said there would be "significant net benefits" in adopting
DTI limits. It is seeking feedback on DTI limits by Aug. 18.
New Zealand's housing market has soared more than 50 percent
in value over the last decade, raising concerns that high
mortgage debt could pose a systemic risk in the event of a sharp
downturn in property prices.
The RBNZ already requires investors to make a 40 percent
downpayment on investment properties, after ramping up
loan-to-value restrictions (LVR) in 2016.
The measures have helped slow the rate of house price
growth in recent months, but the central bank has said any
resurgence in prices could be a worry.
New Zealand's national household debt-to-income ratio stands
at 168 percent, above most other OECD member countries, the IMF
said in a report last month.
(Reporting by Ana Nicolaci da Costa and Charlotte Greenfield;
Writing by Jane Wardell; Editing by Eric Meijer)