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Bank of Israel Governor goes on the offensive: "Without change, there will be a need to raise taxes" - voila! money

2023-05-26T03:23:12.895Z

Highlights: Bank of Israel Governor Prof. Amir Yaron explains why without a change in the demographic situation, there will be a need for a 16% tax increase. Yaron refuses to commit that this week's interest rate increase will be the last. The Governor, a professional figure appointed to his position by the Netanyahu government, has become the target of criticism from political elements. "The Bank of Israel worked all along according to the data and professional considerations only for the benefit of the economy," he says.


Prof. Amir Yaron explains why without a change in the demographic situation, there will be a need for a 16% tax increase, why won't the Arnona Fund help the housing crisis, and what will happen to the interest rate?


Bank of Israel Governor Prof. Amir Yaron. He has become a target for politicians, but insists on speaking his mind (Photo: Flash 90, Flash 90)

"It is important for every Haredi child to have the ability to choose, equality and the ability to go to work. Demography increases the weight of Haredi society in the economy. The coalition funds in the current budget do not meet this principle and do not encourage Haredim to go to work," says Lavalle! Bank of Israel Governor Prof. Amir Yaron.

Two days after his decision to raise the interest rate by 0.25 percent, he reveals: "Already in 2019, I spoke about the importance of Haredim entering the labor market and improving their professional skills. Even then, I warned that without a change in the demographic situation, a 16% increase in taxes would be necessary (statements repeated last week by the Ministry of Finance)."

The battle over the Arnona fund in the Finance Committee: "You will not solve the housing crisis" (Photo: Photo processing, Jonathan Zindel Flash 90)

"The Arnona Fund Will Not Help Solve the Housing Crisis"

Referring for the first time to the Arnona Fund, whose establishment was approved as part of the Arrangements Law, Prof. Yaron adds: "The main idea of the fund was that there are strong authorities in which taxes for businesses are high and municipal taxes for citizens are low."

"The Arnona Fund is intended to change the ratio between Arnona for businesses and households. This is a correct idea, but the proposed mechanism is not good and will involve distortions. This could also result in some municipalities receiving a lot of money depending on their starting point in 2018. The fund will not help solve the housing crisis. It is advisable to give the authorities an incentive to become more efficient."

Regarding the decision to raise the interest rate, the Governor adds: "Without the decisive steps to raise the interest rate, inflation in Israel would have become double digits, the public would have lost confidence in the shekel and people would have gone back to writing contracts in dollars.

"What surprised us and other professionals in the latest index was the cost of travel abroad, which led to the jump."

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"Had it not been for the interest rate increases, the public would have lost confidence in the shekel" (Photo: ShutterStock)

Will he continue to raise interest rates?

The Governor, a professional figure appointed to his position by the Netanyahu government, has become the target of criticism from political elements, the most prominent of which is Finance Committee Chairman MK Moshe Gafni. Despite this, the Governor refuses to commit that this week's interest rate increase will be the last:

"On the one hand, we still see robust activity in GDP, but there are signs of moderation. If there are no surprises or further depreciation of the exchange rate, the current interest rate environment reflects sufficient restraint of prices. That doesn't mean I'm signing off that this is the last interest rate increase. If we have to, we'll keep raising."

Moshe Gafni, Chairman of the Finance Committee. Join the attack on the Governor (Photo: Knesset Spokesperson, Noam Moshkovitz, Knesset Spokesperson's Office)

Not excited about the politicians

Prof. Yaron is not moved by the politicians' attacks: "The Bank of Israel worked all along according to the data and professional considerations only for the benefit of the economy. Without these actions, we would be in a serious situation. I ignore the background noise and politicians' threats. There are no free meals to bring down inflation, even though we are trying to keep the impact to a minimum."

And it is impossible without referring to the huge profits that the banks in Israel rake in, tens of billions of shekels, and the hand is still tilted because of the increase in the interest rate:
"There is no doubt that the increase in the interest rate contributed significantly to the banks' profits both thanks to the depreciation and because of CPI-indexed contracts. Bank profits are very high relative to recent years. I expect them to be active and enlighten customers."

What does the Governor mean? "The banks have quite a bit of money lying in checking accounts, and if they don't need liquidity, they have to divert the current account money to term deposits so that they will receive interest. Need to help with mortgages. It is clear that such measures will affect profitability. We worked to increase customer transparency and would like to see the public more active."

Minister of Housing, Yitzhak Goldknopf. "The Housing Cabinet must be convened" (Photo: Flash 90, Jonathan Zindel)

When will the Housing Cabinet meet?

Regarding the crisis in the housing market, the Governor of the Bank of Israel adds: "We see that the pace of building permits is rising,
and we need to make sure that this process continues. We must make sure that this translates later on into construction starts and project marketing. It is important that the administrative tenders for the land come out at minimum prices that will enable the closing of the tender."

"We are already seeing a decline in land prices, and it will be worth it for contractors to start building. In the end, the end consumer will receive apartments at lower prices, and later this will also be translated into a decrease in rental prices. We are starting to see contractors adapting to lower prices and we must continue to ensure that the process continues."

But the Housing Cabinet, headed by the Housing Minister, has not been convened even once
"I think the Housing Minister must convene the Housing Cabinet. Housing prices must be a priority for the government and that is part of the cost of living. We need to announce in advance the scope of tenders, planning and infrastructure."

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  • Governor of the Bank of Israel
  • inflation
  • interest

Source: walla

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