"This change will ensure that the Reserve Bank has the flexibility to respond to emerging financial stability risks and deploy appropriate tools as required," Robertson said on Tuesday.
"I have largely agreed to the Treasury and Reserve Bank's proposed update to the MoU to add debt serviceability tools, but as I indicated in June this extension should not unduly impact first home buyers.
"I believe this agreed wording will set clear public expectations while maintaining the operational independence of the Reserve Bank. It is still up to the Reserve Bank how it chooses to introduce any restrictions, having had regard to this condition."
The Reserve Bank of New Zealand has announced its intent to consult on ways to tighten lending standards, citing concern about unsustainable house prices and the risks to financial stability.
It has proposed reducing the amount of lending banks can do above a high Loan-to-Value Ratio (LVR) of 80 percent, from 20 percent to 10 percent of all new loans. Consultation will start with banks later this month, with a view to introduce this from October 1, 2021.
The Reserve Bank also intends to start consultations in October on implementing Debt to Income (DTI) restrictions and/or interest rate floors.
"It's sensible for the Reserve Bank to consult on lending rules designed to ensure the stability and soundness of the financial system. Under changes introduced earlier this year, the Reserve Bank also has to have regard for the government's housing policy to support more sustainable prices, including by dampening investor demand for existing housing stock, which would improve affordability for first-home buyers.
"The government has already put in place a number of measures to cool the housing market to make house prices more sustainable and tilt the balance in favor of first home buyers, including extending the bright-line test and removal of interest deductibility.
"Theses initiatives will make a real difference. However, there is no silver bullet to housing affordability and monetary and fiscal policy need to work together to achieve a sustainable housing market," Robertson said.
The Reserve Bank announced in July that it intends to reduce the current COVID-19 stimulatory level of monetary settings in order to meet its consumer price and employment objectives over the medium-term.
Recent data indicate the New Zealand economy remains robust despite the ongoing impact from international border restrictions. Aggregate economic activity is above its pre-COVID-19 level. Household spending and construction activity are at high levels and continue to grow.
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