What recent reports has the Minister of Finance received on the performance of the New Zealand economy?

Thursday, September 17, 2015

STUART SMITH to the Minister of Finance: What recent reports has he received on the performance of the New Zealand economy?

Hon BILL ENGLISH (Minister of Finance): The June quarter balance of payments reported yesterday, and today Statistics New Zealand published the June quarter GDP. The measure of GDP expanded for the 18th consecutive quarter, rising 0.4 percent in the 3 months, taking the annual growth rate to 2.4 percent and annual average growth to 3 percent.

The current account balance was a deficit equivalent to 3.5 percent of GDP for the year ended 30 June, and New Zealand’s net liability position, which measures the value of our overseas assets less our overseas liabilities, is equivalent to 62.2 percent of GDP, the smallest net liability position recorded since 1990.

Stuart Smith: What sectors drove the overall expansion in economic activity in the last quarter?

Hon BILL ENGLISH: The service industries, which comprise around two-thirds of the economy, expanded by 0.5 percent. Primary industry activity rose by 0.2 percent. This is a pretty solid pace of activity for an economy adjusting to the reduction in dairy income, and this kind of growth is providing sustainable opportunities for new jobs and higher incomes.

Grant Robertson: In light of his new-found interest in quarterly GDP figures, can he confirm that it is correct that GDP growth per capita in the first two quarters of this year is the worst since 2011?

Hon BILL ENGLISH: I would not be surprised. New Zealand has a fast-rising population because of the confidence of so many New Zealanders who have decided to stay home and New Zealanders who are coming home. At the same time, the economy has softened, so it is pretty obvious that per capita GDP is not going to be growing fast and may be shrinking at the moment.

Stuart Smith: What reports has he received on the outlook for the economy?

Hon BILL ENGLISH: Last week the Reserve Bank set out its latest quarterly economic forecasts, which expect over the next 3 years growth of 2.2, 2.8, and 3.2 percent through to March 2018.

This growth will be underpinned by the benefits of a significantly lower exchange rate and interest rates that are—if not at—certainly headed towards the lowest interest rates in 50 years. So that is a reasonably solid outlook.

Grant Robertson: Is he satisfied that, based on figures released today, exports as a percentage of GDP are at their lowest level since 1997?

Hon BILL ENGLISH: No, we are not satisfied. In fact, part of the energy of this Government is its relentless drive for a brighter future for New Zealand.

Stuart Smith: What does the Reserve Bank forecast for employment?

Hon BILL ENGLISH: Job creation is pretty important for our households and communities. New Zealand has recorded 11 consecutive quarters of employment growth, with 69,000 more jobs created in the past year, and the Reserve Bank expects continued employment growth of between 1 and 2 percent over the next 3 years.

It expects that the historically high labour force participation rate will persist—that is, we will continue to have a large proportion of our working population available for work.