NZ must stick to Govt plan to head off global risks

A number of ongoing global risks reinforce the need for New Zealand to continue improving its own economic resilience and competitiveness, Finance Minister Bill English says.

It can do that by returning to budget surplus and addressing potential threats to financial stability such as housing affordability, he told the Institute of Finance Professionals New Zealand (INFINZ) annual conference in Auckland today.

“When the National-led Government was first elected in late 2008, we set out with a long-term programme to protect the most vulnerable New Zealanders from the recession, deal with the GFC and build a platform for sustainable growth.

“After inheriting Treasury forecasts showing never-ending fiscal deficits and soaring public debt, we have successfully set a path back to surplus so we can get on top of that debt.

“In addition, we have implemented a plan to improve competitiveness and we are now on a path of steady growth. At the same time, we’re dealing with important issues such as housing affordability,” Mr English said.

“We want to avoid a repeat of the dangerous house price bubble that developed in the mid-2000s, when house prices doubled in five or six years, floating mortgages rates exceeded 10 per cent and household debt got dangerously high.

“That’s why we’re addressing the underlying causes of fast-rising house prices by freeing up more land, removing costly red tape and looking at construction sector productivity.”

Mr English said the Government’s responsible economic and fiscal management had helped keep interest rates for homeowners and businesses lower for longer and had improved New Zealand’s financial stability.

For homeowners, average floating mortgage rates are now about half of what they were five years ago. This is saving a family with a $200,000 mortgage around $200 a week in interest payments.

“Sound fiscal policy and progress with increasing housing supply will help to keep interest rates lower for longer. On the other hand, Opposition promises to increase government spending and pump cheap credit into the housing market will push up rates sooner.

“Under current settings, interest rates are not expected to return to anywhere near their 2008 levels of more than 10 per cent, which is good news for home owners and businesses across New Zealand.”

Mr English, who has just returned from a visit to New York, Boston and Washington DC, said the recent United States budget stalemate was just the latest in a number of global risks to the New Zealand economy.

“As we’ve said all along, we cannot influence these global issues, so we need to focus on what we can influence, such as New Zealand’s competitiveness, better public services and the Government’s own financial performance.

“Together these global events provide a timely reminder to everyone from politicians, to businesses and to households, that we cannot be complacent about the progress we’ve made in the past four or five years.

“Now is certainly not the time to put that progress at risk by reverting to damaging policies that have failed us in the past such as more taxes, more costs on business and more government spending and borrowing.

“We must continue with sensible economic policies, year after year, that deliver better living standards and public services for families across New Zealand.”