That easing reflects the low and steady rates of house price inflation in most other parts of the country, and our stated intention to begin removing LVR restrictions when they are no longer warranted. In recent months, there have been some signs of housing demand spilling out of Auckland, with house price growth starting to increase in Hamilton and Tauranga.
Because monetary policy works with a lag, policymakers’ response to changes in inflation and other economic variables should depend on whether those changes are expected to be temporary or longer-lasting. When that point is taken into account, policy during that period – though certainly accommodative – does not appear to have been inappropriate, given the state of the economy and policymakers’ medium-term objectives.