Hon Bill English
Minister of Finance
2 August 2011 Media Statement
NZ better placed to minimise US debt fallout
The Government has taken several steps to ensure New Zealand can minimise any fallout from the United States’ ongoing
debt problems, Finance Minister Bill English says.
“Despite a compromise deal being reached in Washington, there is no doubt the situation in the United States is serious
– both for the US itself and for the global economy,” Mr English says.
“However, New Zealand is relatively better placed than many other countries to manage in what will remain a pretty
uncertain global environment. We’re getting on top of debt by keeping it below 30 per cent of GDP and we will be back in
surplus by 2014/15.
“Over the next few years, we have an opportunity to build on solid foundations for faster growth and more jobs.
“Our financial system and our economy are both in better shape than a few years ago to manage global market
uncertainties. This reflects improvements in market regulations and an economy that is growing, with households,
businesses and the Government less dependent on debt.
Since 2008, the Government has:
• Turned back 2008 forecasts of never-ending deficits and soaring debt by setting a path back to budget surplus by
2014/15. As a result, net Crown debt is expected to remain below 30 per cent of GDP.
• Front-loaded its borrowing programme during favourable market conditions, which will cover the Government’s
obligations over coming months should markets seize up as they did in late-2008.
• Introduced the biggest reform of the tax system for 25 years, which rewards work and savings, discourages borrowing
and consumption and significantly tightens tax rules on property speculation.
• Overhauled capital market regulations and established the Financial Markets Authority, giving investors confidence in
market rules and enforcement.
• Brought non–bank deposit takers under Reserve Bank supervision, with minimum capital adequacy and credit rating
requirements.
In addition, the Reserve Bank has:
• Introduced new core funding requirements for banks, which require them to have 70 per cent of their funding from
stable sources such as retail deposits and long-term wholesale funding.
• Ensured that in another financial crisis, the Bank can supply temporary liquidity to sound institutions.
“Having cushioned New Zealanders from the recession, we have taken responsible decisions to restrict the build up in
government debt, get spending under control and put the Government’s finances in order,” Mr English says.
“We are also building solid foundations for faster growth and more jobs based on savings, exports and productive
investment. The Treasury forecasts the economy will grow by an average 3 per cent a year over the next four years and
create 170,000 new jobs.
“The high Kiwi dollar is undoubtedly a headwind for New Zealand exporters – reflecting weakness in the US dollar as well
as a perception in financial markets that New Zealand remains a safe place to invest.
“It means we need to do everything else we can to build on the resilience and higher business confidence we’re seeing.
That includes keeping on top of debt and building a faster-growing economy.”
ENDS