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DEFU Shows Economy In Good Heart - Cullen

19 December 2000 Media Statement

"The December Economic and Fiscal Update 2000 shows New Zealand is well-placed to take advantage of favourable conditions for growth," Finance Minister Michael Cullen said today.

"The economy has been through significant turbulence this year generated by volatility on global currency markets and by rising fuel prices.

"Yet the forecasts have had to be only slightly modified since budget night, and the Government's fiscal policy settings remain unchanged.

"The growth profile has been changed but the growth quantum over the forecast period remains the same. This year's forecast has been lowered to reflect a subdued first half but next year's has been raised to capture a stronger contribution from the export sector," Dr Cullen said.

Highlights of the DEFU forecasts are:
 a reduction in the current account deficit from 7.2 percent of GDP in June, 2000 to 3.1 percent in March, 2005
 higher levels of employment and labour force participation combined with a slight decline in unemployment
 a modest tightening in monetary settings to keep second-round inflationary pressures under control
 a pattern of rising budget surpluses.

"The export outlook is particularly buoyant. Forestry exports are high, dairy, beef and wool prices are up and both the manufacturing and tourism sectors are benefiting from the competitive exchange rate.

"Since the Treasury's economic forecasts were finalised on November 14, there has been evidence of a recovery in both business and consumer confidence.

"That trend, if continued, will further buttress the positive economic outlook," Dr Cullen said.


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