Finance Minister Bill English says the real problem for first-home buyers in New Zealand is not Reserve Bank restrictions on home loans introduced in October this year.
Mr English said on Monday that Australia has a capital gains tax and a restriction on foreigners buying homes, but no central bank loan-to-value restrictions (LVRs) as New Zealand has.
House prices in Australia have reached record levels and a sharp drop-off in first home buyers in the market has been reported.
Mr English said this suggests that house prices are too high there - just like New Zealand.
"What it tells you is that the real problem for first-home buyers is affordability of the housing - not the LVR restrictions - although they have some impact on the short-term, no doubt about that.
"The real problem is that the value of the houses is now a multiple of income levels that many first-home buyers simply can't afford."
Mr English says that is why the Government is focused on increasing supply to the market.