18 Apr 2017

MBIE failing to meet self-imposed targets

10:32 am on 18 April 2017

The government department charged with growing the economy, the Ministry of Business Innovation and Employment (MBIE), isn't sure if it will hit the goals it set itself when it was created five years ago.

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Photo: Ministry of Business, Innovation and Employment

MBIE admits it has got a fair way to go before it even gets close to achieving its primary objectives.

When it was formed in 2012, the ministry set itself goals including making housing more affordable, lifting household incomes, getting unemployment below 4 percent and increasing exports to 40 percent of GDP by 2025.

But five years later, the ministry still was not sure if it would hit any of its targets.

One goal was to lift median household incomes from $1300 a week to $1800.

Ministry chief executive David Smol said it appeared this one was on track.

"It's always slightly tricky to judge from a limited amount of data but median household incomes have been growing since 2012.

"And it's feasible that we would hit that target but of course we don't know at this stage - there's still quite a few years to go," he said.

The ministry also wanted to lift exports to 40 percent of GDP.

But the Treasury forecasted it would remain flat at around 29 percent of GDP over the next four years.

Mr Smol said falling dairy prices had hampered progress, as had global events.

"It's just a tough trading environment internationally, so we've seen a general slowing of trade around the world.

"And I think in that light our performance has been pretty good, but certainly we're not seeing progress towards that 40 percent of GDP that is the target that we set."

auckland housing

MBIE says housing affordability in New Zealand "was not where [they] would like it to be". Photo: 123RF

The ministry also wanted housing to be more affordable.

Mr Smol said housing affordability was not where the ministry would like it to be but pointed out that interest rates were low.

"There's definitely a challenge in Auckland where house prices have risen quite sharply.

"That's partly offset by very low interest rates so it means that someone on a given level of income can borrow more than would have been the case with higher interest rates.

"So by some measures the affordability hasn't deteriorated all that much since the middle of the 2000s," Mr Smol said.

The annual Demographia housing survey found Auckland had the fourth-least affordable houses in the world, with prices more than 10 times the median income.

That's up from 6.4 times the median income when National took office in 2008.

It found houses in Hamilton, Tauranga, Wellington, Christchurch and Dunedin were all severely unaffordable too.

Co-author Hugh Pavletich said housing has become far less affordable and mortgage rates have nothing to do with it.

"What the gentleman from MBIE is saying really is confusing housing affordability, structural housing affordability, with mortgage affordability, and they are two entirely different subjects.

"New Zealand is considered to have some of the most unaffordable housing in the world."

Mr Pavletich said New Zealand was on the brink of a housing market crash.

Labour's Grant Robertson said nearly all of MBIE's indicators were going backwards - and massively so - on housing affordability.

"Well I think that's the greatest failure of this government, unfortunately housing is getting less and less affordable. We've seen increases in the prices of 15, 18 even 20 percent over the last few years," Mr Robertson said.

"In terms of the rental market, rents are now becoming unsustainably high in our big cities like Auckland and Wellington."

Another MBIE goal was to have unemployment below 4 percent.

The latest unemployment data showed unemployment had risen from a seven year low of 4.9 to 5.2 percent.

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