Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 


Treasury cautions around 'Rock Star' economy label

Treasury cautions around 'Rock Star' economy label

This morning the Treasury’s Chief Economist Dr. Girol Karacoaglu spoke to Parliament’s Finance & Expenditure Select Committee about New Zealand’s economic and fiscal outlook. Below is his opening statement to the Committee.


Good morning. I’ll keep my comments brief today – I’d just like to recap a few key themes from the Half Year Economic and Fiscal Update in light of recent public discussions about New Zealand’s economic outlook.

It’s no secret that New Zealand is in an enviable position. Our economic outlook is very good compared to most other countries we benchmark ourselves against. “Rock Star Economy” seems to be the phrase on everyone’s lips. That makes great headlines, but it only really reflects our short-term outlook. It’s true that we expect to see a period of higher growth over the next few years, but the Half Year Economic and Fiscal Update forecasts growth to be more moderate after that.

We’ve already seen some of the risks identified in the Update start to materialise. Domestic demand has been stronger than originally forecast, and the reality is that the global environment will continue to be volatile. It will be important to be responsive to these factors.

If we want to achieve the kind of long-term, sustainable economic growth that will consistently raise living standards for New Zealanders, we need to:

1. Learn the lessons of the last decade
2. Show restraint as the economy hits a new gear, and
3. Use the opportunity of higher growth in the short-term to expand the economy, and create a platform for sustained growth over the long-term

The lessons of the last decade
The developed world went into the 2000s with a belief that in many respects we’d answered the question of how to achieve stable, long-term economic growth, with steadily rising incomes. We were wrong. Governments and households overextended themselves, asset markets became overvalued, and extra revenue wasn’t sufficiently used to pay off debt. Then it all came tumbling down. For the last five or six years everyone’s had to take their medicine. New Zealand was better placed than many other countries, but has still felt the impact of the Great Recession.

With things now looking up, this is the time to show we’ve learned. The question is, what path will we take this time?

Showing restraint as we hit a new gear
Over the next few years we expect the Crown’s day-to-day finances to improve as the economy picks up. The temptation might be to spend more.

With the economy operating at or above capacity over the next year or so, too great an increase in government spending risks driving interest rates up higher than they would naturally rise at this point in the cycle. In turn this will put more upward pressure on the exchange rate, and undermine the very export-oriented sectors we want to support higher living standards over the long-term.

Instead, the Treasury’s view is that we need to stay restrained in our spending.

In particular, we need to tightly manage the Crown’s investments in the Christchurch rebuild, to avoid log jams, cost escalations and extra spending. We need to keep pursuing efficiencies in the public sector. We can tighten government spending if household spending is higher than expected. And we can keep steadily reducing debt over time – having room to move on the Crown’s balance sheet was crucial to New Zealand’s ability to support demand in the economy during the downturn. It also meant we could deal with the costs of a large earthquake. We need to rebuild the buffer against future crises.

Use this opportunity
But while short-term choices about how we manage the government’s finances are important, the real prize is long-term economic growth. As the economy shifts into a new gear we have a golden opportunity to pursue lasting gains by lifting productivity.

In this context, the Treasury welcomes the recent public discussions around how to improve educational outcomes. Other areas we see as priorities include:

· Strengthening our international connections – so that New Zealand businesses have better access to emerging markets;

· Encouraging companies to invest in productivity improvements. For example there are some signs of a lift in productivity in the construction sector that could make a real difference to how we manage the economic cycle if they can be sustained; and

· Pursuing productivity gains in the public sector.

To make headway in some of these areas we’ll need to address some complex and persistent challenges. That will require innovation, and within reason, we can afford to take some educated risks. We just have to be measured, and invest wisely, with an eye on the long-term. We might be a rock star, but we don’t want to be a one-hit wonder.

Thank you.

ends

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: A Govt. Christmas Bad News Dump -The Skycity Convention Center Blowout & A Negative MBIE Review

If the government really did have good tidings of great joy you can bet it wouldn’t be strewing them about at Christmas time – which is, traditionally, the dumping ground for terrible news that the government fervently hopes the public will be too distracted to notice. And so verily this Christmas Eve we learn of (a) the explosion of costs to the taxpayer and ratepayer of the vile SkyCity convention centre in Auckland and that (b) the government’s flagship MBIE “super-ministry” run by its Minister of Everything is a disaster zone of incompetence and mismanagement. MBIE is a Titanic looking for an iceberg, or so it would seem. More>>

 

Parliament Adjourns:

Greens: CAA Airport Door Report Conflicts With Brownlee’s Claims

The heavily redacted report into the incident shows conflicting versions of events as told by Gerry Brownlee and the Christchurch airport security staff. The report disputes Brownlee’s claim that he was allowed through, and states that he instead pushed his way through. More>>

ALSO:

TAIC: Final Report On Grounding Of MV Rena

Factors that directly contributed to the grounding included the crew:
- not following standard good practice for planning and executing the voyage
- not following standard good practice for navigation watchkeeping
- not following standard good practice when taking over control of the ship. More>>

ALSO:

Gordon Campbell:
On The Pakistan Schoolchildren Killings

The slaughter of the children in Pakistan is incomprehensibly awful. On the side, it has thrown a spotlight onto something that’s become a pop cultural meme. Fans of the Homeland TV series will be well aware of the collusion between sections of the Pakistan military/security establishment on one hand and sections of the Taliban of the other… More>>

ALSO:

Werewolf Satire:
The Politician’s Song

am a perfect picture of the modern politic-i-an:
I don’t precisely have a plan so much as an ambition;
‘Say what will sound most pleasant to the public’ is my main dictum:
And when in doubt attack someone who already is a victim More>>

ALSO:

Flight: Review Into Phillip Smith’s Escape Submitted To Government

The review follows an earlier operational review by the Department of Corrections and interim measures put in place by the Department shortly after prisoner Smith’s escape, and will inform the Government Inquiry currently underway. More>>

ALSO:

Intelligence: Inspector-General Accepts Apology For Leak Of Report

The Inspector-General of Intelligence and Security, Cheryl Gwyn, has accepted an unreserved apology from Hon Phil Goff MP for disclosing some of the contents of her recent Report into the Release of Information by the NZSIS in July and August 2011 to media prior to its publication. The Inspector-General will not take the matter any further. More>>

ALSO:

Drink: Alcohol Advertising Report Released

The report of the Ministerial Forum on Alcohol Advertising and Sponsorship has been released today, with Ministers noting that further work will be required on the feasibility and impact of the proposals. More>>

ALSO:

Other Report:

Leaked Cabinet Papers: Treasury Calls For Health Cuts

Leaked Cabinet papers that show that Government has been advised to cut the health budget by around $200 million is ringing alarm bells throughout the nursing and midwifery community. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news