One of the new Productivity Commission's first jobs will be to investigate why house prices have been so high over the past decade.
Finance Minister Bill English says the sharp rise in prices made New Zealand more vulnerable to shocks like the global financial crisis.
Just as the Government is looking to cut the number of departments and agencies it funds, its newest agency will officially start work on Friday.
The Productivity Commission's inquiry into housing affordability is due to report back to the Government by the beginning of February next year.
Mr English says households have taken on much more debt because of rising house prices.
He says that is likely to have contributed to higher interest rates and a higher exchange rate, making life for exporters tougher.
The commission will also conduct a separate inquiry into international freight transport services.
