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IMF recommends property taxes for NZ

NZ Newswire logoNZ Newswire 8/05/2017

The New Zealand government should consider new taxes on property to discourage speculators and help local councils with infrastructure, according to the International Monetary Fund.

The international economic organisation released two reports on Tuesday, largely praising New Zealand's economic stability and financial systems.

But, while acknowledging some work had been done to address the housing market's demand-supply imbalance, the IMF executive board recommended further taxes on investment properties.

"Tax measures related to housing could be considered to reduce incentives for leveraged real estate investments by household," the board said.

"Such measures could help redirect savings to other, potentially more productive, investments and, thereby, support deeper capital markets."

The report also said measures such as the Housing Infrastructure Fund need to be complemented by "comprehensive" changes to urban planning laws and a shake-up of the local-central government funding system.

It said a central government tax on property - redistributed to councils - would be useful in helping local councils fund growing infrastructure needs, particularly in smaller communities facing population booms.

Local Government New Zealand said in March that nearly $1.4 billion would be needed for new public toilets, car parks, camping facilities and other basic infrastructure if the tourism industry maintains its current growth.

In the report, the global body of 189 member countries, set up to foster international monetary cooperation, was upbeat about New Zealand's economy which had been underpinned by low interest rates, a booming construction sector, strong migration and improving terms of trade.

However, it noted a growing risk New Zealand's record migration or stronger terms of trade could lead to overheating growth, pushing up house prices and increasing vulnerabilities in the economy.

That risk was rated as medium.

"The IMF notes that the New Zealand economy is more resilient than in the past, specifically referencing our lower current account deficits than in previous periods of expansion," Finance Minister Steven Joyce said in response.

"It also notes that New Zealand is benefiting economically from its current growth in population."

The report said there was "no evidence" of crowding out of domestic labour due to rising migrant numbers, and said immigration was having a positive impact on the economy.

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