Labour’s finance spokesman/spokesperson/spokessexually&speciesagnosticlifeform (delete to taste) David Parker (surprisingly no relation to Peter Parker, well known arachnid of New York) announced the party’s Reserve Bank policy on Tuesday and duly anaesthetised all who read, watched, or heard what he had to say as he weaved a web of seemingly unconnected miraculous solutions to our economic woes, particularly those associated with housing. A number of nice summaries abound so I will merely note that the one thing I do like in his proposals is the idea of ring fencing cash flow losses on residential investment properties against future profits from the same property; the rest I am either agnostic to, confused by, or too stunned to respond rationally. Therefore, I will bow to an ex central banker for his wise counsel on the matter.
Christian Hawkesby is these days head of Fixed Income & Economics at the wonderful Harbour Asset Management – an institution with an unfortunate acronym should you happen to be Jewish or Muslim – but who has worked in two central banks in his past, these being the Bank of England and our very own Reserve Bank of NZ, so one would assume his take would be worth considering. His research note is available here and notes not only some problems with the proposal but also suggests an alternative approach. Worth a read for those interested in exploring further and a valuable addition to the debate.