What reports has The Minister of Finance received on the outlook for the economy?
STUART SMITH (National—Kaikōura) to the Minister of Finance: What reports has he received on the outlook for the economy?
Hon STEVEN JOYCE (Associate Minister of Finance): on behalf of the Minister of Finance: The Reserve Bank earlier today released its Monetary Policy Statement for June. It left the official cash rate unchanged at 2.25 percent.
The Reserve Bank’s outlook for the economy is positive. Growth is forecast to accelerate from around 2.5 percent currently to 3.3 percent by the middle of next year. Overall growth is expected to average 3 percent over the next 3 years.
The Reserve Bank’s view is consistent with Treasury’s Budget outlook of 2 percent to 3 percent annual growth over 4 years. The outlook is supported by accommodative monetary conditions, low oil prices, strong construction activity, and migration.
Stuart Smith: What does the Reserve Bank say about jobs growth and higher wages?
Hon STEVEN JOYCE: The Reserve Bank forecasts growth will translate to more jobs and higher wages over the next 3 years. The Reserve Bank expects employment to increase by 129,000 jobs over the next 3 years. The unemployment rate is forecast to fall at a slightly faster rate than previously expected, to around 5 percent by the middle of next year.
The Reserve Bank is forecasting wage growth to exceed inflation, meaning higher real wages, which would be welcome for Kiwi households, and the Reserve Bank forecasts higher household savings over the next 3 years as well.
Stuart Smith: What are some of the risks included in the economic outlook?
Hon STEVEN JOYCE: Although moderate growth of 3 percent is forecast over the next 3 years, there are risks to this outlook. The Reserve Bank says global economic uncertainty has moderated in the first half of this year and there has been some improvement in commodity prices, and that is expected to continue through to 2019.
However, the global economy remains weak and significant downside risks remain. Domestically, the Reserve Bank cites inflation expectations, the possibility of continued high net migration, and pressures on the housing market as risks for the economy.
The Government is helping to lift the resilience of the New Zealand economy through measures such as export diversification and market agreements, including the Trans-Pacific Partnership.
Stuart Smith: How are lower interest rates and low inflation helping New Zealand families get ahead?
Hon STEVEN JOYCE: Well, I note there are some members in the House who find the economy and households boring, but certainly not on this side of the House. Mortgage rates are at their lowest levels in 50 to 60 years. As the Reserve Bank shows, 2-year fixed rates are now approaching 4 percent.
This is saving a family with a $300,000 mortgage almost $16,000 a year in interest costs, compared with 2008, when mortgage rates were reaching almost 11 percent. To put it another way, that is around $300 a week more in the pockets of those households.
At the same time, cost of living increases remain low—just 0.4 percent over the last year—which means pay increases for New Zealand households are going much further. In uncertain world economic times this country continues to head in the right direction.