An interesting suggestion on Saturday from Paul Chrystall via John Roughan: delink property inflation from the exchange rate by taxing the interest on new property loans (when appropriate) at rates set by the Reserve Bank.
I quite like it. Compared with the status quo its not a huge leap, but it addresses a pretty basic issue which is that there may be two legitimate targets for monetary policy, but there is only one instrument: interest rates.
The basic idea is not new though. Here is Bill English scoffing at Michael Cullen’s version back in 2007 and making some good points along the way.
A mortgage tax wouldn’t just hit people speculating on houses in Auckland, it would hit the whole export sector. Farm debt has gone up dramatically in the last few years.
Still, it might not be beyond the wit of the bureacracy to exempt productive assets. The underlying question is whether its worth trying to design an independent tool that might do the job. On that question, I interpret this exchange between Matt Nolan and Andrew Coleman as being 1 each way.