Bank of New Zealand's head of research Stephen Toplis introduced Finance Minister Grant Robertson as "a fiscal conservative at heart" at a BNZ organised gathering on Tuesday.
It was clear Toplis meant that as a compliment, but Robertson was quick to emphasise his ruby-red Labour credentials when queried about it afterwards: "I'm not sure I agree with Stephen. I think I'm a progressive. What we've shown is we've been prepared to invest significant resources in the NZ economy."
This is in the context of the considerable increase in spending the government made to help cushion the economy through the covid shock.
But anybody listening to the actual speech would have caught Robertson's continual emphasis on "speculators and investors" being responsible for blowing economists' forecasts house prices would fall "out of the water."
Robertson can safely assume the vast bulk of those "speculators and investors" won't be Labour voters and the pejorative connotations of the word speculator will strike a chord with Labour voters. Like throwing red meat to dogs.
Toplis' fellow BNZ economist Craig Ebert had some thoughts on this: "Just what or who a speculator is, as distinct from an investor, is unclear," he wrote in a commentary on Robertson's speech.
"But it will obviously pay to keep an eye out over the coming weeks for policy changes that aim to make it harder for 'speculators' while also giving a leg up and in for first-home buyers."
Are speculators the culprit?
But are speculators the housing-market bogeymen, responsible for house prices spiralling out of control?
Nobody doubts the second part of the previous sentence is true: the latest Real Estate Institute house price index was up 17.3 percent in calendar 2020, a year in which the Consumers Price Index rose just 1.4 percent.
The latest official RBNZ statistics, which were for November, show the investor-share of new mortgage borrowing has been rising over the last year, reaching 24.2 percent of new mortgages in November compared with 20.1 percent a year earlier and 17.5 percent in November 2018.
The government does seem to want to favour first-home buyers and the data there is more mixed; they accounted for 17.3 percent of new mortgage lending in November, down from 18.3 percent in November 2019 but up from 16.5 percent in November 2018.
Put another way, all new mortgage lending rose 36.7 percent between November 2019 and November 2020, new lending to first-home buyers rose a more modest 29.1 percent while new lending to investors rose 64.8 percent.
But then most lending was to other owner-occupiers, accounting for 57.8 percent of total new lending and up 30.3 percent in November 2020 from the same month a year earlier.
A lot of borrowing
So that's a lot of buying and selling of houses by owner-occupiers, as well as building home extensions or other improvements or simply borrowing against their increasing equity for other purposes.
Are all the owner-occupiers not 'speculators,' eagerly looking at each new crop of housing market statistics to see how much their net worth has risen?
Home ownership has been recognised by governments of all stripes as a desirable social good, providing a more secure footing for bringing up children, creating stronger community ties, building savings for retirement, and giving citizens a bigger stake with a vested interest in the economy.
Yes, it may be difficult for first-home buyers to get their feet on the property ladder, as industry parlance has it, but it was ever thus.
Millennials may look at their parents' generation with envy but would be horrified if they were asked to pay the double-digit interest rates that prevailed in the 1970s and 1980s.
Also, the baby boomers who endured such interest rates are now appalled by the pathetically low interest rates banks are offering on term deposits, rates that are woefully insufficient to compensate for inflation.
It doesn't take a lot of nous to realise that one has to pay tax on such pitiful interest income and buying a rental property, which is tax-advantaged rather than tax-penalised, stacks up a whole lot better.
Lack of appetite
Robertson amply demonstrated how little appetite his government has for making many significant changes that would re-balance this equation.
No, this government will not introduce a capital-gains tax and, no, the government doesn't want to see house prices fall.
"Eventually, we will see a moderation" in house prices, was the best Robertson could manage when asked point blank whether he wanted to see house prices fall.
The government is looking at a range of measures, including whether landlords can continue to offset interest payments on a mortgage against any income from that property – the government has already moved to prevent landlords from offsetting interest costs against other income.
Robertson said that interest offset is one of the measures the government was looking at, but he wasn't making any commitments yet.
My bet is the government will do nothing further on this front because disallowing mortgage interest costs as a landlord expense would destroy the economics of the rental market.
That certainly would bring house prices crashing down as landlords raced for the exit.
The other measures the government is known to be looking at would make little difference to most landlords.
Robertson wouldn't be drawn on whether the government plans to extend the bright line test for investors – currently, if an investor sells a property after owning it less than five years, that investor is liable to pay income tax on any capital gains.
But the typical landlord in NZ is a baby boomer with one or two rental properties who tend to buy and hold for the long term.
Asked whether the government would allow the Reserve Bank to use debt-to-income ratio controls specifically targeting property investors, Robertson said: "that would be one area where I would be looking to get advice."
RBNZ has been asking for permission to add these restrictions as one of its macro prudential tools but the government has previously ruled that out.
Again, such restrictions would have little impact on existing landlords who tend to have relatively low mortgage debt, especially after the house price boom we've already enjoyed.
The one government policy that will make a difference is if it manages to build a lot more houses, because it's been obvious for many years that we don't have enough houses and that's a fundamental reason for house prices rising.
But that won't happen in a hurry.