Supplementary Stabilisation Instruments

Initial Report
to
Governor, Reserve Bank of New Zealand
Secretary to the Treasury
10 February 2006
Executive Summary

1. The large and prolonged housing market cycle of recent years, and the associated pressure this appears to have placed on domestic resources, the inflation outlook, and the exchange rate, prompted you to commission this review. The review has looked at whether there might be useful tools, with a direct bearing on the housing market and/or the market for residential mortgage credit, which could supplement the central role of interest rates in managing inflation, either in this cycle or in future cycles in which housing-related pressures played a particularly important role. If such measures, targeted more closely to the housing or housing finance sectors, were available they might alleviate some of the pressures on the exchange rate, and on the tradables sector of the economy. A joint

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