1. KATRINA SHANKS (National) Link to this
to the Minister of Finance
What reports has he received on the economy?
Hon BILL ENGLISH (Minister of Finance) Link to this
Statistics New Zealand today reported that real GDP grew by 0.6 percent in the March quarter. The economy has now grown by 1.9 percent over the past four quarters, following the contraction that began at the start of 2008. The continuing recovery, which is broadly aligned with that of our trading partners, is good news, because it helps to create new jobs and raise New Zealand’s living standards. However, there is significant work to do. The economy has recovered only about half of the fall that it incurred during 2008, and growth is mixed across the sectors. That is why the Government will continue with its policy programme.
We need to overcome the effects of the recession and of the mismanagement of the previous Government, which means that we need to rebalance the economy so that it will save more, produce more worthwhile output, and rely less on consumption and debt. We also need to reduce New Zealand’s vulnerability to overseas lenders. As the United Kingdom Budget showed, if these problems are allowed to persist, then major and painful changes will be needed later. There are encouraging signs that the recovery is headed in the right direction, and we welcome those.
Hon David Cunliffe Link to this
Has the sharp growth in overseas demand for raw logs, seen in today’s statistics, been matched by the closure of timber mills, loss of jobs, and decline of the domestic industry to such an extent that the Timber Industry Federation called it a “rape and run industry”; if so, when will he take action to ensure that our economy is one that produces added value and secures jobs for New Zealanders?
The forest products industry is cyclical; sometimes log prices are up, which makes it harder for domestic sawmills. Actually, for quite a number of years log prices have been down, which has made it easier for domestic sawmills. The good news is that the growth across the economy is coming from the right places. Government consumption is no longer growing rapidly. Export volume growth is the strongest that it has been in 3 years, while, overall, tradable sector output has shown its first signs of sustained growth since 2004.
Grant RobertsonYes, that is right—very well. The Government needs to use every tool at its disposal. In the Budget we made changes to the taxation system to try to assist the rebalancing of the economy. I know that the Government is continuing to focus on the careful use of public money to ensure that we do not take any more than we need to from the incoming-earning side of the economy.
Clare CurranWas he surprised by the drop in the communications sector, or was it expected, given the continual delays in the Government’s broadband plan, which has failed to lay an inch of broadband fibre in 18 months, creating a crisis of confidence in the industry?
I do not make guesses about quarterly growth rates, let alone individual components of them, because they do fluctuate. The broadband plan, as the member will know, is quite complex, and I am pleased to say it is on track, on target, and going very well. We certainly hope that we will lay ultra-fast fibre considerably quicker than, for instance, the Australians.
There is little doubt that the economy entered a long-term slow-down over the past 5 years, well before the world was in recession—that is, New Zealand went into recession before the world did. For example, per capita GDP declined between 2005 and 2008, even when the rest of the world was doing well. This is primarily because of the economic mismanagement of the previous Government. Even today, average per capita income remains at only 2004 levels.
Hon David Cunliffe Link to this
When he refers to “the economic mismanagement of the previous Government”, does he include the zero net debt achieved under Labour, and does he include the world record - low unemployment rate achieved under Labour; and would he care to speculate on whether today’s results would have been achieved had we taken his advice when he was in Opposition and given unaffordable tax cuts to the wealthy in 2005 and 2006, thereby making debt worse?
If the previous Government had taken any amount of sensible advice, it would have done a lot better than it did. For instance, it would not have blown out Government spending from 2004 onwards, it would not have helped to foster a property boom, it would not have put taxes up, and now we would have a faster-growing economy.