PQ3. Economic Programme—Reports
[Sitting date: 23 July 2014. Volume:700;Page:4. Text is subject to correction.]
3. JOHN HAYES (National—Wairarapa) to the Minister of Finance : What recent reports has he received supporting the Government’s economic programme?
Hon BILL ENGLISH (Minister of Finance): Earlier this month the credit rating agency Fitch Ratings confirmed that it had revised New Zealand’s AA credit rating outlook from stable to positive. This indicates the credit rating’s likely direction over the next year or two. Fitch Ratings said that the Government’s fiscal consolidation and track to surplus in 2014-15 are increasing the resilience of New Zealand’s sovereign credit profile, and it noted that the Government has a credible plan to lift fiscal surpluses in the years ahead and to reduce net core Crown debt to 20 percent of GDP by 2020. Fitch Ratings also said that New Zealand’s economic policy framework, business environment, and standards of governance ranked among the world’s strongest from a credit perspective and warranted high-grade sovereign ratings.
John Hayes : In confirming the positive outlook for New Zealand’s credit rating, what did Fitch Ratings say about New Zealand’s current and future economic growth prospects?
Hon BILL ENGLISH : It noted that New Zealand’s macroeconomic record and prospects are supporting its credit rating. It said that real GDP grew by 2.7 percent in 2013 and is expected to increase to 3.8 percent in 2014. This will be supported by, among other factors, reconstruction in Canterbury; dairy prices, which have moderated but are still at elevated levels; and a house-building catch-up. Fitch Ratings noted that although New Zealand’s average GDP growth over the past 5 years, at 1.6 percent, is lower than the median among AA rated countries, it was less volatile and was higher than the 1.2 percent median growth rate among AAA rated countries.
John Hayes : What other factors did Fitch Ratings note in respect of its positive ratings outlook for New Zealand?
Hon BILL ENGLISH : One of the factors Fitch Ratings noted was New Zealand’s historical vulnerability around high net external debt and persistent current account deficits. I am pleased to report that both of these indicators have improved significantly in recent years. For example, the unadjusted current account balance in the March quarter was a surplus of $1.4 billion—the largest dollar surplus ever recorded—and the annual 2.8 percent deficit is well under half the deficits of around 7 percent of GDP in the 3 years to 2008. So our net international liability position has improved. It was 65 percent of GDP in March this year, well down from a recent peak of 85 percent of GDP in early 2009.
John Hayes : And for my last question, what other reports has he received about the state of the New Zealand economy?
Hon BILL ENGLISH : I have seen one report claiming that Government debt is larger as a percentage of GDP than New Zealand had during World War II. This is completely false. Gross Government debt is currently around 35 percent of GDP. At the end of World War II it was around 150 percent of GDP. David Cunliffe has again completely misled New Zealanders