Hon Bill English

Minister of Finance

15 May 2013

IMF confirms New Zealand has the right balance

The International Monetary Fund has confirmed that the Government’s economic plan strikes the right balance between supporting growth and limiting public debt, Finance Minister Bill English says.

In its final staff report issued this morning, the IMF endorses New Zealand’s balanced and pragmatic economic management.

“Coming out the day before the Budget, this is a strong vote of confidence in the Government’s programme over the past four years,” Mr English says.

“It follows a string of encouraging economic figures, which shows the economy growing at 3 per cent last year, an extra 50,000 jobs over the past two years, falling unemployment and healthy consumer and business confidence.”

In particular, the IMF notes the New Zealand economy appears to have strengthened in the last few months of 2012, with subdued inflation and fiscal policy that strikes the right balance between supporting growth and limiting public debt growth.

The IMF says: “The benefits of the plan are many. First, it withdraws fiscal stimulus at the right time by making room for the expected increases in private sector and earthquake-related reconstruction spending.

“Second, it has improved the macroeconomic policy mix by reducing pressure on monetary policy.

“Third, it creates fiscal space to help the country deal with aging and health care costs that are expected to increase over the long-term, and to cope with any negative shocks that may cause a sharp reduction in domestic economic activity or potential liabilities associated with the banking sector.

“Last, it could help raise national savings, reduce the current account deficit, and limit the increase in foreign liabilities.”

The IMF also notes the New Zealand banks remain sound.

However, it says New Zealand’s longstanding external liabilities remain a risk, reflecting historically low household savings rates.

“The Government has acknowledged this as New Zealand’s largest vulnerability and we have a sound, long-term plan to help turn that around,” Mr English says.

“Our economic programme includes a large number of measures aimed at improving the competitiveness of businesses. They include increasing exports and innovation, improving skills and infrastructure, deepening the capital markets and sustainably developing our natural resources.

“We are making progress in all of these areas.”

The IMF report is available at: http://www.imf.org/external/np/sec/pn/2013/pn1351.htm

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