2. CRAIG FOSS (National—Tukituki) Link to this
to the Minister of Finance
What are the implications for New Zealand of current developments in international economies and financial markets?
Hon BILL ENGLISH (Minister of Finance) Link to this
It is clear that the global economy is recovering from the recent financial crisis, but there are a number of uncertainties and risks. For instance, emerging economies are experiencing a strong recovery and our trade with those economies is growing. However, developed economies are recovering more slowly, and economies such as the UK and the US are adopting policies that tend to devalue their exchange rates and therefore create a headwind for our export recovery. That reinforces the need for New Zealand to continue along a path of improving our competitiveness, so that we can achieve faster growth and sustainable jobs.
What commitments have New Zealand and other Asia-Pacific countries made to help overcome their current economic challenges?
At a recent meeting of APEC Finance Ministers there were a number of common views—for instance, countries with current account deficits should take steps to boost domestic savings, and those with surpluses should take steps to increase domestic demand; we should continue moving towards more market-determined exchange rate systems that reflect the underlying economic fundamentals rather than competitive devaluation of currencies; and we should ensure sound fiscal management. There was unanimous support from finance Ministers across well over a dozen economies for those propositions.
How does New Zealand’s economic programme compare with the approach outlined by APEC Finance Ministers?
The Government’s current comprehensive economic programme is very much in line with the general international consensus. In particular, there is some real interest in New Zealand’s tax package, because it is seen as a concrete measure that is helping this country move away from borrowing and consumption, towards favouring exports, savings, and investment, and, in that sense, it is undoing the severe damage done to the economy by the last Government.
The policies that were rejected not just by the APEC Finance Ministers but, I think, by most economies around the world were wasteful and fast-growing Government spending, ad hoc and opportunistic changes to tax systems, larger deficits, fiddling with monetary policy, and trying to pretend the exchange rate can be fixed. Those are essentially the policies of the current Labour Opposition.