Prime Minister John Key addresses waiting media after delivering his speech at the Trans Tasman Business lunch in Auckland.

The Prime Minister has come down hard on Auckland saying a new policy will force the city's council to release more land and bring down house prices.

In a post-Budget speech on Friday, Prime Minister John Key said the Government was about to put in place a National Policy Statement making councils free up land for urban development.

Making more land available would have an effect on house prices, Key said.

GETTY IMAGES Auckland's current restrictions on building outside the urban limit was "a failed experiment", Key said.

"Living proof of that is Christchurch," where property prices were now rising at less than the rate of inflation, he said.

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The effect of the National Policy Statement would vary around the country, but in essence it linked the price of land to demand in the economy.

"If the land price is going up too quickly (councils) have to amend their plans to release enough land, and if they don't do that they'll breach the law."

It would mean developers could take legal action.

A recent decision on the Resource Management Act showed the courts thought National Policy Statements took precedence over other things, Key said.

"What will ultimately happen is the developer will go along and say, 'I want to zone this residential', and if the council say no and the developer takes the council to court, the developer will win," he said.

"There won't be a debate about whether they release more land, they'll be releasing more land."

A National Policy Statement did not require Parliament to pass legislation, Key said.

Auckland's Metropolitan Urban Limit (MUL), introduced in the early 1990s to restrict urban development, was "a failed experiment, utterly failed", he said.

It had encouraged people to land bank.

Auckland's incoming Unitary Plan, the first overall plan for the region since the super city was created, will do away with the MUL and release more rural land for development.

Asked if the government could step in and put commissioners in charge in Auckland if the council did not release enough land, Key said that wasn't the point.

"If the Unitary Plan doesn't meet the demands of Auckland, the National Policy Statement because of the way it works will drive it, mark my words," the Prime Minister said.