The Prime Minister has rejected the Reserve Bank's fears the Government's house building targets for Auckland and Christchurch might be too ambitious.
John Key says he is confident the Government's policies will ensure it meets its targets of boosting housing supply in both cities.
In a speech to the Property Council in Auckland on Tuesday, Reserve Bank deputy governor Grant Spencer said the targets for building new homes in Auckland and Christchurch are very ambitious and it will need a major effort to get near them.
However, Mr Key dismisses the Reserve Bank's worries.
"They've never raised that with me and I've lots of discussions with them, so they've never raised the issue that they don't believe that's possible.
"Secondly, it is possible, because we know that in the past, there have been times where numbers close to that have been constructed."
Meanwhile, Labour Party leader David Cunliffe has again criticised the Government's housing policy, blaming it for the Reserve Bank not exempting first home buyers from its lending restrictions.
"The reason the bank, I believe, was not in that position is because the Government's housing policy is an absolute shambles. They neither have a decent supply site mechanism like KiwiBuild, nor do they have a capital gains tax and the Reserve Bank's been left up the macro-prudential creek without a paddle."
But Finance Minister Bill English says other countries which have a capital gains tax are also struggling to keep housing affordable.