Early signs that the economy is rebalancing

It is encouraging to see signs that some of the imbalances handicapping New Zealand's economy for the past five or six years are easing, Finance Minister Bill English says.

However, risks remain and the Government is focused on continuing to roll out its broad-based economic programme to generate faster growth and support more sustainable and higher-paying jobs.

"It's clear that the tradeables side of the economy - exporting and import-competing industries - went into recession in about 2004. Remarkably, there have been no net new jobs in agriculture and manufacturing since 2002.

"By contrast, since 2004, the non-tradeables sector - government and domestic industries - has grown by about 12 per cent. That's simply not sustainable."

The Budget's tax reform package, which left the vast majority of New Zealanders better off, was the next step in the Government's programme for boosting economic growth and helping New Zealand families get ahead.

The programme includes a multi-billion investment in productive infrastructure such as roads and ultra-fast broadband, action to get the Government's finances in order and improve public services, measures to improve skills and education and a drive to cut red tape and regulation.

Mr English identified a number of indicators which suggest New Zealand's economic imbalances are at least stabilising.

"First and foremost, the economy is now growing, as opposed to shrinking as it did in Labour's last term. The Budget also forecast 170,000 new jobs over the next four years and average household incomes to rise by about $7000 in that time.

"Second, the tradeables sector grew 3.4 per cent in the nine months to March 2010, compared with just 1.2 per cent growth in the non-tradeables sector. This is the largest positive gap between the two sectors over a nine-month period since December 2002.

"Finally, New Zealanders are being more careful with their spending. Per capita private sector consumption increased by only 1 per cent in the past year, after consistently increasing by more than 4 per cent, year on year, between 2002 and 2007.

"Reserve Bank figures show household debt is also easing for the first time in more than a decade. After increasing rapidly from 100 per cent of disposable income in early 2000 to a peak of 159 per cent in mid-2008, household debt has eased to 155 per cent of disposable income."

Mr English emphasised that these were only early signs of the economy rebalancing and more work was needed to build this momentum, particularly with New Zealand - households, business and the Government - owing almost $170 billion in debt to the rest of the world.

"This reinforces the Government's commitment to continue with its broad-based programme to ensure growth and jobs come from the right parts of the economy."