3. CHRIS AUCHINVOLE (National—West Coast - Tasman) 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
This morning the Reserve Bank issued its Monetary Policy Statement, which held the official cash rate unchanged at 2.5 percent. The bank noted that the economy has performed more strongly this year than it forecast in its June statement, despite weaker growth among our trading partners. This reflects stronger terms of trade, providing stimulus to households and businesses, and rising consumer and business confidence. Overall, the bank expects real economic growth to average about 3 percent over the next 4 years, helped by the earthquake rebuild in Canterbury.
The bank has said that “While the domestic economy has been surprisingly robust … global financial risks continue to intensify.” In particular, the economic outlook for New Zealand’s trading partners has deteriorated markedly since June. Revised data for the US shows that its recession was deeper than previously thought, and growth has slowed in the UK, Germany, and France. Despite these risks, export prices are expected to remain relatively high, supporting incomes and boosting GDP and job growth in New Zealand.
What steps has the Government taken to address the risks identified by the Reserve Bank?
The main risk identified by the Reserve Bank today was New Zealand’s vulnerability to the uncertainty and volatility around events in Europe. One of the most important steps that the Government has taken is to plan to reduce our vulnerability to foreign lenders. In that respect, turning round 2008 forecasts of never-ending Budget deficits and permanently rising debt was important. We expect now to be one of only a handful of developed countries heading back towards surplus over the next few years, at which point we will be able to start repaying debt.
Hon David Cunliffe Link to this
Is the Reserve Bank’s current forecast that growth will peak at 3.5 percent next year, compared with his Budget projection of above 4 percent, a sign that once again he has overpromised and under-delivered on economic growth?
No. The Reserve Bank has changed its expectations of the profile of growth, but has not really changed its expectations of the total amount of growth. It expects that with the problems in Europe and a downturn in our trading partners, we will have a slightly lower peak in growth in 2012-13. But it is not a serious shift.
Hon David Cunliffe Link to this
In that case, given that economic output per person is still 2 percent below where it was when he took office, despite the recession ending over 2 years ago, can he name another New Zealand Government that has a weaker record on economic growth than this one?
I can name another New Zealand Government that wrecked—maybe without intending to, but it certainly wrecked—the economic engine of this economy, which is the export sector, and that was the previous Labour Government. Despite the best economic conditions in a generation, it left the economy in a mess, and it will take us a few years to clean it up.
Mr SPEAKER