In this final edition of Focus on Finance for 2011, I talk about the major events of the year - and what's coming up for the new Government in 2012.
Click here to watch my latest briefing on YouTube
As we head into the summer break, it feels like it's been another long year - and a hard one for many families and businesses, particularly in Canterbury.
While it's been tough, it's been heartening to see the resilience New Zealanders have shown in the face of big challenges. People have pulled together and they've rolled up their sleeves and got on with the job at hand.
On a brighter note, the All Blacks won the World Cup and the economy has continued to improve, despite ongoing global uncertainty. Looking around the corner, there is more work to do to get the economy growing faster and the Government is firmly focused on that task. You'll see more of that next year, but in the meantime, I'd like to wish all the readers of this newsletter a Merry Christmas and a Happy New Year.
THE ECONOMY CONTINUES TO GROW
It was pleasing to see the economy posted solid growth of 0.8 per cent in the September quarter on the back of an increase in manufacturing output and a boost to tourism and spending from the Rugby World Cup. The result took GDP growth to 1.9 per cent in the past year. For more information read my media statement.
Despite the challenges of volatile global markets and a high Kiwi dollar the outlook for New Zealand's exports remains positive and rebuilding in Canterbury will contribute to growth as it picks up next year.
NEW GOVERNMENT KICKS INTO GEAR AFTER THE ELECTION
The Government has kicked back into gear, with support agreements signed with ACT, United Future and the Maori Party within two weeks of the election. Ministers have been sworn in, Cabinet has met and taken decisions on a number of issues - including the two outlined below around AMI and the mixed ownership model - and the Government has outlined its programme for the next three years in the speech from the throne. Ministers will be busy in the New Year working on that programme and implementing the Government's post-election action plan.
AMI SALE GIVES PROVIDES GREATER INSURANCE CERTAINTY
IAG's agreement to purchase AMI Insurance is good news for the Canterbury insurance market and the Government's liability in relation to its back stop support deal for AMI policyholders. As part of the deal, IAG has given an undertaking to continue to offer insurance to AMI's customers, as well as all of its existing customers, on renewal and transfers in Canterbury and throughout New Zealand. We welcome this assurance, which will ensure ongoing insurance cover for 60 per cent of the Canterbury market.
As part of the deal, the Crown will take over ownership of AMI Insurance's Canterbury earthquake related claims. The part of AMI dealing with earthquake claims - along with its reinsurance for those events - will be retained as a new Crown company and will continue to manage AMI's earthquake claims, ensuring continuity for customers. Treasury estimates the Crown's liability will drop from $335 million, in the last published set of full-year Crown accounts, to about $120 million, as a result of the deal. For more information, read my media statement.
EXTENDING THE MIXED OWNERSHIP MODEL
The Government has confirmed the next steps in its mixed ownership programme to offer New Zealanders minority shareholdings in four state-owned energy companies and Air New Zealand. Cabinet has agreed that Mighty River Power should be the first company prepared for an initial public offering (IPO), most likely in the third quarter of 2012, subject to market conditions. The programme is likely to involve a number of IPOs spread over the next three years or so, depending on market conditions and company circumstances.
Mixed ownership is a win-win. It's an opportunity for New Zealanders to invest in something other than housing or finance companies. And it will free up taxpayers' money so the Future Investment Fund can invest in priority new assets like schools, hospitals and irrigation, without having to borrow from overseas lenders. For more information about the Government's decisions read my media statement. For further information, read Treasury's background paper.
THINGS TO LOOK OUT FOR
- 19 January - Statistics New Zealand will release the Consumer Price Index for the December quarter.
- 26 January - The Reserve Bank will issue its latest Official Cash Rate review.
Hon Bill English