5. JOHN KEY (National—Helensville) Link to this
to the Minister of Finance
By how much did the New Zealand economy grow in the second half of 2005?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
The latest figures indicate the economy took a short breather of zero growth after 20 consecutive quarters of strong growth, which is the longest period of sustained economic expansion since the mid-1970s.
Have the recent announcements of growth data caused him to change his mind from only a month ago when he said: “… to talk, as some have, of falling into recession is both naive and a little dangerous,”; if not, why not?
Hon Dr MICHAEL CULLEN Link to this
No, I have not changed my mind on that. Firstly, we are yet to have the updated quarterly figure for the last quarter of last year. Given the fact that there are some oddities in those numbers, if one disaggregates them, they could well be revised upwards. Secondly, I notice a number of bank commentators suggesting the first quarter of this year was likely to be positive.
Shane JonesHas the Minister received any recent reports suggesting business confidence is linked directly to economic growth?
Hon Dr MICHAEL CULLEN Link to this
No—in part because those surveys go up and down so much that we would have to have extraordinarily short economic cycles to explain them. The most recent surveys have started to show confidence picking up again. For example, the Auckland chamber of commerce survey suggested that the net proportion of businesses expecting an improvement in their position has doubled between December and March.
Does the Minister agree with global investment bank UBS’s assessment of the New Zealand economy, that: “Despite some politicians and business leaders decrying the suggestion, the risk of recession looms large.”, and which politicians does he think UBS is musing about?
Hon Dr MICHAEL CULLEN Link to this
I assume it is musing about the intelligent ones. No, I do not agree with UBS in that respect. We still have a very tight labour market. Business investment is running at much higher levels in those latest numbers than was the case in 1998 and 1999—all of which suggests it is not likely to be a very deep downturn at all.
Craig FossWas the Minister surprised to find that the latest GDP figures show the Government administration growing by a whopping 10.3 percent in 2005, which is far ahead of the construction industry with only 4.2 percent growth, and does he think that, rather than experiencing a building boom in recent years, New Zealand has actually experienced a massive bureaucracy boom?
Hon Dr MICHAEL CULLEN Link to this
No, I do not. In fact, those numbers are not consistent with the actual growth in Government spending. In the last quarter of last year there was a particular one-off factor in terms of substantial census spending, which is a 5-yearly occurrence.
Does the Minister agree with Westpac that the economy is “in the cack” and that we are likely to see negative growth in the first quarter of 2006, which means that New Zealand will be in recession, or does he intend to treat private sector economic advice with the same arrogance and derision that he treats his own Treasury officials when they tell him information he does not like hearing?
Hon Dr MICHAEL CULLEN Link to this
Treasury advice is that it is expecting the economy to bottom out at about 1.5 percent economic growth. Those numbers are likely to be revised before the Budget. Many of the same bank economists predicted the dollar would fall very slowly this year, to about 64c by the end of the year. I trust the member did not bet any of his substantial sums of money on that particular forecast.
If New Zealand was 20th in the per capita income tables of the OECD in 1999, and remains in the same place today, and if we are to assume that growth remains as moribund in the years ahead as it is currently, will New Zealand, far from surging into the top half of the OECD, be falling much further behind; in which case does he think he should take the same advice that his Associate Minister of Finance has been meting out to the Commonwealth Games athletes and start delivering on his potential?
Hon Dr MICHAEL CULLEN Link to this
I thank the member for recognising that in this stage of my career I still have great potential.
Hon Phil GoffCan the Minister confirm that GDP over the last 6 years has increased at approximately twice the rate of GDP increase under the National Government that preceded this Government, and, secondly, that profits by private firms are approximately three times the level of those under the last National Government in its 6 years?
Hon Dr MICHAEL CULLEN Link to this
It is certainly correct that growth has been faster under Labour. One of the interesting features of this growth is that a disproportionate amount of it has been captured by the business sector in terms of increased profits. I still hear moans from the Opposition about increased profitability under Labour.