7. Hon DAVID CARTER (National) Link to this
to the Minister of Finance
Does he stand by his statement of 3 November 2005 that “Growth in productivity is the major factor in setting New Zealand securely on a path of sustained economic growth.”?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
Yes, and I stand by the rest of my statement that “it requires investment by firms in plant and equipment, and investment by government (and private sector partners) in infrastructure. But the major investment it requires is in the skills of the workforce.”
Has the Minister seen the most recent figures published by Statistics New Zealand, which show that productivity growth for the last 12 months is the lowest on record; and what is the Minister’s response to that record?
Hon Dr MICHAEL CULLEN Link to this
The figure the member cites is labour productivity, not total factor productivity. Of course, in a period when the economy slowed down but employment remained extremely strong—unemployment remained well below 4 percent—that is the natural outcome. Treasury is forecasting labour productivity growth to average in excess of 2 percent per annum over the next 3 years.
Has the Minister also seen a recent publication from the Bank of New Zealand headed “Living In a Fool’s Paradise”, which describes the latest productivity figures as “abysmal”; and is he aware that this report notes that productivity growth has declined every year since 2001 whilst he has been the Minister of Finance?
Hon Dr MICHAEL CULLEN Link to this
What has, in fact, been happening over that period is extremely strong labour force growth and employment growth. During the 1990s when the economy slowed down the cycle, there was large labour force shedding and unemployment rose. In 1999 Mr English said Labour’s plans to reduce unemployment to the kinds of levels we are now seeing were a “hoax”.
Is it not a fact that he as Minister of Finance has presided over a period of economic buoyancy, but that the productivity figures prove that nothing has been locked in to the long-term benefit of the New Zealand economy?
Hon Dr MICHAEL CULLEN Link to this
I repeat to the member that Treasury is forecasting labour productivity growth to average in excess of 2 percent per annum over the next 3 years. There have been significant changes to the tax system in the last couple of years, and further changes in this year’s Budget will tend to underpin that productivity growth.
Jeanette Fitzsimons Link to this
When the Minister’s goal of sustained economic growth runs into conflict with the Prime Minister’s goal of becoming the first truly sustainable nation in the world and he has to choose between continuous growth and genuine sustainability, which will be the Government’s priority goal and why?
Hon Dr MICHAEL CULLEN Link to this
I think the member makes a false dichotomy. New Zealand, for example, has a very poor record in terms of output per unit of energy consumed. We are clearly capable of substantially increasing productivity growth, while at the same time addressing the sustainability issues that the Prime Minister has outlined. Indeed, in the longer term one suspects that, for New Zealand, increasing the level of economic growth will require attention to be paid to those sustainability issues—if for no other reason than international marketing considerations.
Craig FossI seek leave to table four documents. The first is a document from Statistics New Zealand from 16 March, entitled “Labour Productivity Growth Lowest on Record”.
Madam SPEAKERThe second document, dated 19 March, is a report from the Bank of New Zealand entitled “Living in a Fool’s Paradise … Productivity slump highly inflationary”.
I seek leave to table the third document, dated 22 March, again from the Bank of New Zealand, entitled “Productivity Slump Inflames Inflationary Concerns”.
I seek leave to table the final document, which is a written question from myself to the Minister of Finance that asks: “Is there persistent core inflation in New Zealand as reported in the Reserve Bank of New Zealand December 2006 Monetary Policy Statement?”, to which the Hon Dr Michael Cullen answered: “Yes, but it remains consistent with the requirements of the Policy Targets Agreement …”.