11 Dec 2014

Politicians grill Wheeler on OCR

7:26 pm on 11 December 2014

New Zealand's economy looks tremendous compared with those in Europe, Reserve Bank Governor Graeme Wheeler told MPs today.

Reserve Bank governor Graeme Wheeler.

Reserve Bank governor Graeme Wheeler. Photo: RNZ / Diego Opatowski

Mr Wheeler appeared before Parliament's Finance and Expenditure Select Committee this afternoon after leaving the official cash rate steady at 3.5 percent this morning.

He told MPs that, compared with Europe, New Zealand's economy looked tremendous.

However, Labour's Stuart Nash said property investors were taking the place of first home buyers in Hawke's Bay and asked Mr Wheeler whether he was aware of any other developed nation which allowed people to make tax-free returns on properties.

Mr Wheeler responded: "I'm not sure of the practices in other countries."

Nor could Mr Wheeler directly answer ACT MP David Seymour's question as to whether the Reserve Bank's loan-to-value-ratio was unfair on people in the provinces.

"What I would say is, really, the solution to Auckland's housing problems lies on the supply side," he said.

National's Chris Bishop asked Mr Wheeler how it was possible for economic forecasts to be improving while dairy prices were tanking.

"Well you're seeing other commodity prices increase quite significantly - particularly beef prices," he said.

"But you're also seeing meat and, touch wood, hopefully timber prices have bottomed out."

New Zealand First MP Barbara Stewart asked if there was anything Mr Wheeler thought could possibly derail the economy, to which he said he did not see any massive risks.

"But there are risks there. Clearly the dairy price, if it stayed down low for a couple of years or longer, would be a major concern," he said.

He also said if house prices rose suddenly it could be concerning.

Mr Wheeler has signalled a further three hikes in the official cash rate by the end of 2017.

He picked annual growth to remain buoyant at about 3 percent over the next few years but said inflation pressures appeared contained for now.

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