18 May 2000

Government urges calm and reason on the economy

"The current round of breast-beating about the economy is at odds with the facts," Finance Minister Michael Cullen said today.

"What some commentators seem to have forgotten is that the reason the Reserve Bank raised interest rates is because it has upped its growth forecasts for the next two years.

"Three months ago, it was projecting growth of 3.5 percent and 3.6 percent. It has now revised these numbers up to 4.3 percent and 4.6 percent respectively.

"In fact the outlook in the Bank's May Monetary Policy Statement, released on Wednesday, is extremely positive. Business investment is projected to increase 25 percent in the next three years and exports 19 percent," Dr Cullen said.

"Even more encouraging is recent evidence that the recovery is finally spreading to the export sector. The latest merchandise trade data shows the value of manufactured exports in the March 2000 quarter was 17.8 percent higher than in the same period last year.

"Add to that a good agricultural season, an improving trend in commodity prices and the boost to exporters of a competitive New Zealand dollar and we are looking at a substantial improvement in our trade balance.

"These are all reasons to be cheerful and I would urge everyone to take a deep breath and calm down." Dr Cullen said.

"Of course the petrol price rise will add to motorists' costs and higher interest rates, although good for savers, will be bad for borrowers.

"But it is important that these increases are kept in context. Generally the economic news is good.

"I would also note that, despite the best efforts of our political opponents, neither the petrol increase nor the Bank's decision on interest rates can be blamed on the Government," Dr Cullen said.

ENDS

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