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New Zealand Economy Growing - Government Opens Books

The Treasury’s 2013 Half Year Economic and Fiscal Update and the Government’s 2014 Budget Policy Statement – 17 December 2013

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By Hamish Cardwell

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The government remains on track to get back into surplus in 2015/16, the economy's growth rate is increasing, but there are still “challenges” for the New Zealand economy.

Finance Minister Bill English presented the 2014 Budget Policy Statement in Wellington today which set out the government's policy goals and priorities for Budget 2014.

Read the full Budget Policy Statement here

He said on average wages were increasing faster than inflation, business confidence was at its highest since 1999 and unemployment was dropping.

However the high Kiwi dollar, which was largely a factor of offshore economic instability, was a “major headwind” for New Zealand's export sector.

Mr English put a dampener on any expectations of an election year lolly scramble as the economy picked up, with tax cuts unlikely in next years budget as as any surplus was still likely to be modest.

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Full audio of the press conference. Secretary to the Treasury Gabriel Makhlouf opens, with Mr English beginning at 8:40

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The government's overall budget plan focused on responsible financial management, growing the economy, building better government services and rebuilding Christchurch.

The New Zealand economy had grown by 2.5 percent in the year to June, despite the effect of the drought, which was among the highest annual growth rates among developed countries, Mr English said. This had picked up in the second half of 2013, with a growth rate of 3.6 percent expected over next year. From to March 2015 would drop back to 2.3 percent for the following two years.

“We are confident that the New Zealand economy can continue to make sustained progress”.

The forecast showed the government would post a “modest” operating surplus before gains and losses of $86 million, which was similar to what was forecast in Budget 2013. Surpluses were set to increase $1.7 billion and $3.1 billion in the next two years.

Net debt would peak at $64.5 billion in 2015/16. This was lower than the $70 billion forecast at the last budget, although the government was still borrowing $78 million a week on average.

Core crown expenses as a percentage of GDP was dropping, and currently sat at 28 percent.

53,000 more New Zealanders had jobs compared to a year ago, with forecasts for 125,000 new jobs to be created between September 2013 and the last quarter of 2017. Welfare costs were down $708 million over four years compared to the Budget 2013. This was due to improved labour market as well as a reduction in the number of sole parents on welfare, Mr English said.

However, there was a lot of work to do to make these forecasts and projections a reality, Mr English said.

He expected New Zealand's growth rate to be better than Australia's, who would release their own economic figures later today.

“We are doing a bit better than most other developed countries”.

New Zealand was susceptible to the “uncertain” global economic environment because of its relatively small size. New Zealand makes up one quarter of one percent of the world economy, he said.

New Zealand's trade with with Asia was growing, in some places “considerably”, but Australia remained New Zealand's largest trading partner.

He said it would be helpful if the United States economy picked up as it would bring down our exchange rate, which would be beneficial for exporters.

Also at the press conference Secretary to the Treasury Gabriel Makhlouf Presented the 'Half Year Update' - the opening of the Government's books which happens twice a year.

He said the Crown's financial position was largely unchanged from Budget 2013 with growth becoming more embedded and broad-based, but still largely driven by internal demand.

New Zealanders' had paid down debt, but were still cautions with their spending decisions, Mr Makhlouf said.

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ENDS

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