(Adds analyst comments, details on possible timing)
WELLINGTON Feb 8 The Reserve Bank of New
Zealand (RBNZ) will undertake a cost-benefit analysis of
imposing debt-to-income (DTI) limits aimed at cooling down a
red-hot housing market, New Zealand's finance minister said on
Wednesday, though it is unlikely DTI measures will be used this
The RBNZ has been lobbying the government for months to get
permission to add DTIs to its macroprudential arsenal to combat
the country's "excessive" house price growth in a low interest
rate environment - while simultaneously attempting to meet a
minimum inflation target.
"I have discussed DTIs with the Reserve Bank Governor, who
remains concerned about the levels of debt in some households in
the context of recent increases in house prices," Finance
Minister Steven Joyce said in an emailed statement.
Despite this latest step towards convincing the government
to sign off on debt-income limits, there was uncertainty over
if, when and how DTIs would be implemented.
"There are lots of unknowns and then you throw in the fact
there's a changing government, changing governor, it looks like
a stretch we’ll see anything this year," said Phil Borkin,
senior economist at ANZ.
New Zealand's national elections were scheduled for Sept 23
with RBNZ Governor Graeme Wheeler announcing this week he would
step down three days later at the end of his five-year term,
leaving deputy governor Grant Spencer temporarily at the helm
while the bank searches for a new chief.
Wheeler said in November when the central bank cut interest
rates to the current record low of 1.75 percent that he was
lobbying the government for permission to set DTI limits,
although he said at the time he had no immediate plans to use
The RBNZ's signalling that there were to be no further rate
cuts and cooling house prices in Auckland made it unlikely the
bank would use DTIs in current market conditions, economists
But record levels of migration have kindled fears that
modest growth in Auckland could be temporary.
"They'll have it in their toolkit for that rainy day, the
bank wants that option," said ANZ's Borkin.
New Zealand house prices rose 11.8 percent in the year to
December, though the red-hot market of Auckland saw some
cooling, the Real Estate Institute of New Zealand (REINZ)
reported last month.
Joyce said that a public consultation for views on DTI
measures would begin in March and continue through the first
half of the year.
The RBNZ will meet on Thursday to set monetary policy and is
widely expected to keep rates on hold at 1.75
(Reporting by Charlotte Greenfield; Editing by Jane Wardell and