1. AMY ADAMS (National—Selwyn) 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
More good news. This morning the Reserve Bank issued its Monetary Policy Statement. It confirms the early signs of an economic recovery. GDP has probably increased modestly through the first half of 2011, despite the impact of the Christchurch earthquake. The bank expects the pace of growth to pick up, supported by high commodity prices and a number of other factors, including the earthquake rebuild. Businesses are expected to increase their staff hiring and capital investment.
What are the Reserve Bank’s economic growth forecasts for the next few years?
It is predicating GDP growth of 1.2 percent in the year to March 2011, 2.5 percent in the next 12 months, and 4.6 percent to March 2013. The expected growth in export volumes has remained about the same as the central bank projected in March. Private consumption growth has been revised upwards. These forecasts are about the same as, if not slightly more positive than, the Treasury forecasts in the Budget.
Hon David Cunliffe Link to this
Is he aware that the Governor of the Reserve Bank has just confirmed to the Finance and Expenditure Committee that the only reason that the Reserve Bank is more optimistic than his own officials is the high commodity prices, which themselves are surrounded by downside risk?
The fact that our terms of trade are about the highest that they have been in a long time is a reason for optimism, and of course there is a risk that commodity prices could drop back. I think the more important point is that the Reserve Bank forecasts are roughly the same as Treasury’s forecasts, which are roughly the same as those of most other economists. The Opposition’s assertion that the forecasts are widely optimistic is probably overly pessimistic.
How do the Reserve Bank economic growth forecasts compare with the Treasury forecasts that accompanied the Budget last month?
The Reserve Bank’s forecasts are a bit stronger than Treasury’s. They forecast 2.5 percent growth in the next year, whereas Treasury forecasts 1.8 percent. But I must say that forecasts do not make an economy grow. What makes an economy grow are the decisions that New Zealand households and businesses make, and my sense is that they are becoming increasingly confident, but not overconfident, about the prospects for this economy. That is more important than the forecasts.
Hon David Cunliffe Link to this
Does the Minister agree with commentary in the New Zealand Herald and on www.interest.co.nz, which says nothing is being done to correct the current account imbalance, nothing is being done to correct the growing international debt, nothing is being done to create jobs, and it is time that someone did something?
What is the Reserve Bank’s outlook for job growth over the next few years, and what measures is the Government taking to support new jobs?
Again, the Reserve Bank is expecting about the same level of job growth as was forecast in the Budget, which is around 35,000 new jobs a year. That is actually not exceptional for New Zealand; that was the average rate of job creation for the 15 years from 1990 to 2005. The Government is doing everything it can to give businesses the confidence to invest, grow, and create new jobs. The indications are that the combination of positive leadership from the Government and a sound Budget is helping with business confidence.