[Sitting date: 25 November 2014. Volume:702;Page:3. Text is subject to correction.]

2. ANDREW BAYLY (National—Hunua) to the Minister of Finance : What reports has he received confirming the economy is continuing to grow and that this growth is supporting more jobs and higher incomes?

Hon BILL ENGLISH (Minister of Finance): A number of reports show that New Zealand’s solid economic growth is supporting more jobs and higher incomes. Statistics New Zealand’s latest GDP data confirmed that the economy grew by 3.9 percent in the 12 months to June, the highest growth rate in 10 years, and a tribute to the extraordinary efforts of millions of New Zealanders in their homes and their workplaces. The latest household labour force survey confirmed that the unemployment rate fell to 5.4 percent in September—the lowest rate since March 2009—and an extra 72,000 jobs were created over the past year. In terms of higher incomes, the benchmark used by successive Governments over the years for setting New Zealand superannuation—that is, average hourly earnings—increased by 2.3 percent in the year, compared with inflation of 1 percent. So there are more jobs and real increases in incomes.

Andrew Bayly : What other economic indicators show that the growing economy is helping New Zealand families and households to get ahead under their own steam?

Hon BILL ENGLISH : At any given time there are economic indicators that illustrate the challenges for New Zealand—say, for instance, falling dairy prices—and there are others that are positive for families and households. Low global inflation, a strong Kiwi dollar, and more jobs mean that we are not seeing the kinds of inflation increases that usually come with this kind of economic growth. So New Zealanders have slightly more spending power, as, on average, their incomes are rising a bit faster than the cost of living.

Andrew Bayly : What global and domestic risks does the Minister see for the New Zealand economy over the next 1 or 2 years?

Hon BILL ENGLISH : We have some confidence that New Zealand will perform solidly over the next few years and deliver moderate increases in incomes for New Zealand households, but it is clear that there are some global risks. For instance, Europe and Japan appear to be headed for recession. There is some uncertainty about the Chinese and Australian economies, and some of those changes are having an impact on New Zealand. We have seen falls in global commodity prices such as forestry and dairy, which can have a negative impact on the economy. We have also seen falls in the price of oil, which will have a positive impact, particularly for households, at the petrol pump. However, we believe that the New Zealand economy is sufficiently resilient to handle these global challenges.

Andrew Bayly : What are the implications for Government revenue of the lower growth in the nominal or dollar value of New Zealand’s economic output?

Hon BILL ENGLISH : The lower nominal growth that comes from, particularly in this current year, a drop in our terms of trade will affect farm and company incomes, and also some wages. We expect that this is likely to flow through to the Government’s books in smaller than forecast increases in revenue. This reinforces the need for the Government to continue to control its spending and to focus on returning to surplus next year. We are also focused on reducing net debt to below 20 percent of GDP by 2020. Treasury will include its best assessment of these circumstances in the half-year update next month. This is an unusual combination of economic circumstances, but we believe that the strength of the economy and constrained Government spending can deliver a surplus when the final accounts are published around this time next year.

ENDS

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