Michael Cullen doing a Allan Bollard

Michael Cullen the Deputy PM of New Zealand holding the Finance Portfolio has suggested that a levy on the mortgage interest rate is an option before the Government to cool the housing market and bring down the value of NZ dollor, all with the idea to help exporters and driving away foreign investors who are dumping their funds into New Zealand, attracted by the high interest rates.

Looks like Cullen is attempting to do what Bollard tried and failed, that is talking up a scare and hoping this will have the desired effect of cooling the housing market. He should know better. If this is a threat, does Labour have the political will or majority or support to deliver on the threat? They don't. He is going to cut a sorry figure as did Trevor Mallard in the waterfront stadium fiasco.

The stock market here lacks depth. The movement in prices are limited to a few cents. There are lack of good investment opportunities and what good pickings are there, they are tending to be bought up by Aussies. Unless the country's stock market really delivers by giving a good return like the emerging markets of India, Brazil, Russia (which seems unlikely in the near future), there seems to be no good alternative investment prospects.

The government should encourage individual savings in designated instruments by giving tax breaks and let the fund gatherers mop-up the money and invest wisely to give an equal return as the housing market. They may have to invest all over the world. The success of Cullen Fund which is managing the superannuation/government surplus funds is a good example.

Also the surplus of the government can be used to subsidise house-buying by first-home buyers, who may be given an interest-principal holiday at the government's cost. Though it will initially raise the demand for house prices, once the scheme is stabilised, people may be confident of utilising the scheme when required and this may flatten the housing boom-bust cycle gradually.

Another good investment opportunity is to privatise University Education and allow opening of more Universities for special programmes like medicine, nursing, software development, etc. Many countries have used this route to make Education a good investment opportunity and at the same time increase the level of expertise in chosen fields. We require more doctors and nurses, etc and it would be a good idea to get more of them qualified and trained here itself to work in the health sector here at good pay scales.

Such schemes may divert surplus funds away from the housing sector and will benefit the country in other ways. It is really not a good idea to scare away foreign funds. Instead they should be channelised into infrastructure and development oriented projects so the long term benefits would be more and will help in growth of the New Zealand economy consisitently. This is an art that our politicians and money-managers should learn and practice better.