2. TODD McCLAY (National—Rotorua) 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
Today Statistics New Zealand reported that real GDP grew by 0.2 percent in the June quarter. The economy has now expanded in five successive quarters and has grown by 2 percent over the past year. This follows five quarters of contraction that began at the start of 2008. The numbers today illustrate that the economy is headed in the right direction. Private consumption growth was almost zero, which tells us that households have clamped down on their spending. By contrast, export volumes have risen by 7 percent and had their strongest quarter on record. Although we want stronger growth, this switch towards saving and exporting more is precisely what the economy needs as a prerequisite for sustained higher incomes and sustained new growth, which is a reversal of the trend of the previous 5 years.
Most commentators see a continuation of the expansion through the next few years at around 2.5 to 3 percent per year. Of course, given world conditions, it is likely that progress along this path could be volatile. Also, local events will impact on it—for instance, the Canterbury earthquake will have some negative impact. Trading partner growth looks to be weaker in the second half of 2010, though it could still end up being positive. I think most people are realising by now, though, that we have a different kind of recovery from what is usual in New Zealand. In this case, exporting is strengthening, and people are saving more. In the shorter term, that means things are a bit tougher; in the longer term, it is the right direction for the economy.
Hon Sir Roger Douglas Link to this
Is the Minister aware that since he became the Minister of Finance, the gap between Australian and New Zealand incomes has increased by 29 percent; if so, how does he plan to achieve the Government’s concrete goal of catching Australia by 2025?
I do not agree with the member’s figures, but we share the common goal of catching Australia. The Government will continue with the plan it is currently following: extensive investment in infrastructure, cutting red tape in regulation, lifting skills and education across New Zealand, reforming the tax system, supporting innovation, and improving the efficiency of the Public Service, which makes up about one-quarter of the economy.
Hon Sir Roger Douglas Link to this
I seek leave to table a chart prepared by the Parliamentary Library comparing New Zealand gross average weekly earnings with Australia’s, purchasing power parity adjusted.
Mr SPEAKERThe next step to help strengthen the economy is next week’s tax changes. These include across-the-board personal tax cuts to the value of about $4 billion, offset by increases in GST, tobacco excise, and the effective tax rate on property investment. This will help boost New Zealand’s long-term growth prospects by tilting the economy towards savings, investment, and exports, and away from borrowing, housing speculation, and excessive consumption.