What reports has he received on New Zealand’s economic vulnerabilities?
New Zealand’s main economic vulnerability is the combined public and private debt to the rest of the world. This debt, which is measured by our net international liabilities, is one of the main indicators that lenders and credit rating agencies focus on when deciding our creditworthiness. New Zealand’s net international liabilities have improved in recent times, reflecting an increase in savings. But with US and European fears driving global uncertainty, there is clearly more work to do.
What progress has New Zealand made in reducing its international liabilities?
New Zealand’s net international liabilities have dropped from a peak of 86 percent of GDP in late 2009 to about 69 percent of GDP in March 2011. This improvement is even more marked when compared with Budget 2009 forecasts, which suggested that the figure would have climbed to 106 percent of GDP by now. So instead of it being 106 percent of GDP, it is actually around 69 percent. The Government has been working hard to reduce its own borrowing while putting in place policies that lift economic growth.
I think it is important just because the current state of the financial markets, particularly in the US and Europe, make it clear that financial markets are becoming more sensitive to debt—that is, any country that has significant international liabilities will come under the microscope. So although the New Zealand ship is in better shape than it was 3 years ago, global waters have become significantly rougher.
What reports has he seen of policies that would increase debt and heighten New Zealand’s vulnerability in uncertain global markets?
I have seen reports of a number of policies that would require more borrowing in uncertain global markets—for instance, a tax package that would result in $6.6 billion more debt. It is certainly not one for which the Government is responsible.
Members should just ask their questions, although some interjections, I do acknowledge, are difficult to ignore.
Does muddling through, as the Prime Minister described the Minister of Finance’s policy, involve losing another 50,000 jobs, or does he stand by his forecast of an employment gain of 175,000 net jobs over the next 4 years?
To deal with the first question first, we had a question yesterday about the National Employment Indicator. It is a partial measure of jobs. The household labour force survey, which the Opposition has used for the last 2 years and 11 months while in Opposition, is the standard. By that measure, the number of jobs has grown. Treasury has forecast 175,000 new jobs, and we do not see any reason as yet to change that figure.