The Reserve Bank has made a submission to the Parliamentary inquiry on housing affordability suggesting a capital gains tax on rental investment property to dampen rising property prices.
Andrew King, from the New Zealand Property Investors Federation says using taxes to bring down house prices has not worked in other countries.
He says Australia has even higher house prices and growth than New Zealand, despite having a capital gains tax. In Australia, realised capital gain on rental property is taxed at half the normal tax rate.
National's finance spokesman Bill English is taking issue with the Reserve Bank's view the tax system is biased in the favour of the housing market.
Mr English says his party is against broadening the capital gains tax and is not in favour of changing the way Inland Revenue treats rental losses. He says IRD already collects capital gains tax off some in the housing market.
He suggests the Reserve Bank gets its advice from Inland Revenue rather than peddle what he calls popular myths.