News and Updates from Bill English

The Government is taking steps to swiftly repay investors, reduce the cost to taxpayers and ensure minimal disruption to the wider economy following the receivership of South Canterbury Finance, Finance Minister Bill English says.

"It's sad to see a longstanding New Zealand institution in this position. The Government, like everyone else involved, hoped South Canterbury would be able to work its way through its difficulties, but unfortunately we were advised today that it has been put in receivership," Mr English says.

"As a result of the receivership, the Government is moving swiftly to repay the money owed to South Canterbury depositors under the Crown Retail Deposit Guarantee. We are also taking other steps to reduce the cost to taxpayers and minimise disruption to the wider economy.

Steps the Government has taken include:

• The Crown has nominated the Trustee as the eligible creditor under the terms of the guarantee and will pay the Trustee $1.6 billion in full today. This will ensure depositors and stockholders are paid promptly without the need to apply to anyone.
• The Crown will today make a loan to the receiver of $175 million, which allows it to repay all of South Canterbury Finance's prior ranking debts. Once this transaction is completed it will put the Crown in a position of control, as the first-ranked creditor in the receivership, so we can ensure an orderly and well-managed receivership process.

"Ensuring all depositors in South Canterbury Finance get their deposits back as quickly as possible will ensure a minimum of disruption to the economy.

"While this will incur an upfront cost, it will ultimately reduce the cost to taxpayers by about $100 million by ensuring the Crown is not liable for interest payments after the date of settlement.

"Furthermore, being in control of the receivership process takes the pressure off the receiver to quickly sell any assets.

"This ensures the Crown can get the best deal for taxpayers. Businesses that owe money, or are owned by South Canterbury, can continue to operate and there will be a minimum of disruption to both the local and national economy.

"The up front cost to the Crown of repaying South Canterbury's depositors is about $1.6 billion, but we would expect to recover the bulk of that as the receiver sells the assets over time.

"The final expected net cost to the Crown is already provided for in the Crown Accounts within the overall provision of about $900 million for all companies covered by the scheme," Mr English says.

31 August. The Finance Minister briefs the media on the Government's moves swiftly repay investors, reduce the cost to taxpayers and ensure minimal disruption to the wider economy following the receivership of South Canterbury Finance. See
http://beehive.govt.nz/release/govt+m... for details.

The enactment of the Insurance (Prudential Supervision) Bill provides increased certainty for New Zealand insurance policy holders, Finance Minister Bill English says.

The Bill, passed last week, makes the Reserve Bank of New Zealand the prudential regulator of all insurance providers that carry out insurance business in New Zealand. It is the first time the New Zealand industry has been subject to legislated prudential regulation.

"The Bill's main purpose is to promote the maintenance of a sound and efficient insurance sector. Policyholders will benefit from greater certainty their insurer has sufficient financial strength to ensure it can pay claims when they are made," Mr English says.

"In addition, it is a clear signal to the rest of the world that New Zealand is aligning itself with established trends in overseas insurance regulation.

"The strong consultative and collaborative approach followed in developing this legislation has ensured the Act does not impose excessive or unnecessary compliance costs on providers and is generally accepted by the industry," Mr English says.

The implementation phase of the new Act will include a transitional period of up to three years to enable insurers to bring themselves into compliance with the new requirements.

Finance Minister Bill English will visit Hong Kong and Singapore next week, to meet business, investment and government leaders and update them on New Zealand's economic programme to achieve faster growth and jobs.

"Asia and New Zealand have developed strong trade and business links in recent years, and we are building on that through a series of free trade agreements and other initiatives," Mr English says.

"The Government is keen to continue open dialogue with business and government leaders in this part of the world - there is considerable interest in New Zealand's economic programme.

"In particular, we will update them on economic and fiscal developments since I visited last year. We will also share ideas about building a strong and sustainable recovery from the worst global recession in many decades."

Mr English will meet senior Government figures and speak to the New Zealand Chamber of Commerce in Hong Kong on 31 August. The following day, he will meet Hong Kong Monetary Authority chief executive Norman Chan.

In Singapore on  2 September, Mr English will meet Foreign Minister George Yeo, speak to the New Zealand Chamber of Commerce and visit the Singaporean Agency for Science, Technology and Research.

The next day he will meet Singapore Prime Minister Lee Hsien Loong and Finance Minister Tharman Shanmugaratnam, and Mr English will speak at The Economist Asia-Pacific regional economic forum.

New Zealand's economic recovery is being led by the export side of the economy which has experienced a significant turnaround from the low point of the recession, Finance Minister Bill English says.

"The recovery will be patchy at times. We are seeing this reflected in stable rather than growing results for domestic industries like housing and retail, and indicators such as business confidence and the share market," Mr English said in a speech to the Farmers Mutual Group Farming Leaders Forum today.

"However the outlook for the tradeables sector - exports and import competing industries - is strong. This is particularly so for primary industries which have increased their output and enjoyed good price rises since the middle of last year.

"Higher export prices drove a 5.9 per cent jump in the terms of trade in the March 2010 quarter. This is the largest quarterly rise since 1976.

"In addition, the seasonally adjusted trade balance for the June 2010 quarter was a surplus of $389 million. This follows a seasonally adjusted surplus in the March quarter - the first since December 2001.

"While commodity prices slipped back slightly in June and July - as measured by the ANZ World Commodity Price Index - prices remain 47 per cent higher than a year ago and near the record highs they hit March this year.

"So while parts of the domestic side of the economy have been fairly flat - due to the uncertain global environment and the need for businesses and households to pay down large stocks of debt - our tradeables sector is leading New Zealand's recovery.

"This is starting the process of rebalancing our economy towards exports and growth and away from unsustainable borrowing, government spending and consumption.

"However, turning around the imbalances that built up over the past decade will require a relentless, long-term focus and commitment. The only way we can permanently lift New Zealand's economic growth is through considered and consistent reform and change, year after year.                              

"Budget 2010 took several steps in that direction - including across the board personal tax cuts from 1 October, which will encourage hard-working New Zealanders to earn and save more.

"In the past 18 months, we have been extremely busy rolling out policies. In recent days we have tasked the Savings Working Group with the job of taking a close look at how to improve New Zealand's national savings record and we will announce more policies in coming months," Mr English says