Bill talks about the shape of the economy going into the new year and what can be expected from Government in 2010.

Crown accounts for the five months to November 30 were slightly better than forecast, but reinforce the need for responsible fiscal and economic management through 2010, Finance Minister Bill English says.

"We face another six years of Budget deficits and we're borrowing an average $240 million a week, every week, for the next four years.

"The best way - in fact, the only way - of getting on top of this significant fiscal challenge is to get the New Zealand economy growing and giving businesses the confidence to invest and create higher-paying jobs.

"The Government has embarked on a significant programme that includes reducing red tape, investing billions of dollars in productive infrastructure, getting better services from the government sector and addressing imbalances and inequities in the tax system.

"Budget 2010 will clearly set out the next steps of that plan, so that the economy grows faster and creates opportunities for families to get ahead."

The Crown's operating deficit before gains and losses for the five months to November 30 was $3.7 billion - or $700 million better than forecast late last year in the Half-Year Economic and Fiscal Update.

The operating deficit including gains and losses at $1.4 billion was $1.1 billion better than forecast, after better-than-expected investment performances by the New Zealand Super Fund, ACC and EQC.

"Monthly variations in the Crown's finances can reflect timing differences that are later reversed - and they need to be seen in the context of net core Crown debt rising from $17 billion in 2009 to a forecast $65 billion in 2014.

"The recession will continue to be felt on the Government's finances for some time. Anything we can do to shorten that process and get the economy growing faster will make a significant difference."

New Zealanders can go into the Christmas break feeling more positive after two quarters of economic growth, but more work is needed to ensure a strong sustainable recovery, Finance Minister Bill English says.

GDP data shows the economy grew 0.2 per cent in the September quarter and June quarter growth was revised upwards from 0.1 to 0.2 per cent. In the September quarter household consumption and mining were stronger than expected and manufacturing and construction down.

For the year to September 2009, the economy contracted 2.2 per cent compared with the year to September 2008.

"While growth is still weak, today's figures are positive news. New Zealanders can go into the Christmas break feeling a bit more confident about the economy and the year ahead," Mr English says.
 
"Two quarters of growth – following five quarters of contraction - reflects a stabilisation in the global economy and the Government's sound economic management.

"The positive data follows Treasury's updated forecasts which show unemployment is likely to peak sooner and at a lower level than previously thought, with 64,000 fewer jobs expected to drop out of the economy.

"However the recovery remains fragile and any further problems abroad could weaken our growth prospects. That is why it is critical we improve the competitiveness of our exporters and address structural imbalances in our economy.

"To climb back up the world income ladder and to replace jobs lost during the recession we need businesses to have the confidence to invest and create jobs. The Government's role is to make that as easy for them as possible.

"We have set out a comprehensive programme to lift our economic performance and we will be developing that further in 2010," Mr English says.

Minister English discusses the outcomes of the half-year budget review. "The most positive news out of the forecast today was about jobs," he says and goes on to explain why, despite some good news, the effects of the recession continue to be felt throughout the economy.

MERRY CHRISTMAS

As we head into the summer break, it feels like it's been a long year - and a hard one for many families and businesses. Looking around the corner, there is more work to be done to get our economy really growing again, but I'm pleased some of the gloom is lifting and New Zealanders can go into the New Year more confident about their jobs and incomes. With those slightly better tidings I'd like to wish all the readers of this newsletter a Merry Christmas and a Happy New Year.

ECONOMIC OUTLOOK

This week Treasury opened their books for the Half Year Economic and Fiscal Update, which shows how the Government and country are doing economically.

The updated forecasts showed a better economic outlook than Budget 2009. The recession was not as deep as originally feared and growth is expected to be slightly stronger over the next four years.

Supporting jobs has been the Government's focus for most of the year and from my perspective the most heartening news in the update was that 64,000 fewer jobs are now forecast to be lost from the economy than predicted in the Budget. You can read my press statement here.

However reduced business profits and a lower tax take mean the improved outlook does not immediately flow into the Government's accounts. Our fiscal position remains challenging. We face another six years of deficits and the amount we need to borrow in the next four years has only slightly reduced from $250 million a week to $240 million a week.

The best way to improve that position is to lift our economic performance and growth rate. That will be the Government's main focus in 2010.

CAPITAL MARKETS DEVELOPMENT TASKFORCE

The Government is keen to develop New Zealand's capital markets so investors have a better range of options and businesses get the investment they need to help our economy grow. My colleague, Commerce Minister Simon Power, this week released the final report of the Capital Markets Development Taskforce. It includes a range of recommendations including:

• Expanding the range of products available to investors and improving the quality of advice they receive.
• Increasing access to capital for businesses.
• Improvements to securities law.
• Changes to the structure and operations of finance sector regulatory agencies.
• Addressing tax incentives that cause distortions in the local capital market.

The Government will respond to the report next year. The Minister's press release can be read here.

THINGS TO LOOK OUT FOR IN THE NEW YEAR

As well as responding to the Capital Markets Development Taskforce the Government will receive the Tax Working Group report and the first National Infrastructure Plan in the New Year. Both should make interesting reading.

The Tax Working Group report, which we are expecting to receive in January, will look at fiscally neutral ways to improve New Zealand's tax system. The Government will consider the report seriously and signal any changes - if there is a sufficiently compelling case - in Budget 2010.

The Infrastructure Plan will be a stock take of New Zealand's existing infrastructure and planning. Evidence shows that good roads, a reliable electricity grid and faster broadband can improve productivity. The aim of the plan is to identify strategic gaps and start a dialogue with the sector and public about the best way to fill them. It too will be released early in the New Year.

Out and About

The year has flown by and Christmas is almost upon us. Over the past month I have been around the electorate for openings, school visits, and meeting constituents.

Among the schools I visited were Gore High, St Peters College, Southland Boys and Kaitangata Primary.

I had the privilege to open several projects. At Kaitangata, I opened the new gymnasium. The community was well represented and the kapa haka group and school performed items for the event.

Cutting the cake at Kaitangata Primary School

At Southland Boys High School I opened the JR Page Gymnasium and the Alex Lindsay Performing Arts Suite. The gymnasium is named in honour of JR Page, a former physical education teacher, while the performing arts suite is named after Alex Lindsay, a prominent musician and old boy of the school.

I also opened Quinn's Pharmacy's new building and Stage 3 of the Gore Sports Stadium. The stadium is a great asset for the Gore community. I spent a number of days watching netball in the rain at the Preston Street Courts so certainly know that players and spectators alike will enjoy this new facility.

It is also good to see the ground for the new hockey turf being prepared next door. Our young people are so fortunate to have volunteers giving up their time, supporting sports and building facilities like these.

Gore Sports Stadium a great community asset

The Clutha Southland Electorate Christmas Party was an opportunity to catch up with many people from around the electorate. It was great to see young people interested enough in politics to attend and I enjoyed talking to these inspiring young people.

I was guest speaker at the Otago Southland Film Industry evening in Queenstown. I was impressed with the professionalism of the people involved in the film industry, which has gone from strength to strength, utilising our incredible scenery to sell New Zealand overseas.

In Wellington

Budget policy statement

The Government's firm focus in 2010 will be achieving higher economic growth and giving businesses the confidence to invest and create jobs.

Responsible management of the country's finances will also be essential, with another six years of forecast Budget deficits.

Growth matters because it creates jobs, increases incomes and improves the living standards of New Zealand families.

This week, as Minister of Finance, I issued the Half-Year Economic and Fiscal Update and 2010 Budget Policy Statement.

Updated Treasury forecasts show that both economic growth and the fiscal outlook are a little better than forecast in the Budget in May.

This reflects the fact that the global economy has stabilised and the success of significant Government initiatives in the past year to fight the recession.

However, that does not mean that all of the problems of the recession have passed - risks remain that growth could weaken again.

Unemployment is forecast to peak sooner and lower than previously predicted - 7 per cent in early 2010 as opposed to 8 per cent in the second half of 2010. However, it is likely to remain at elevated levels throughout 2010, even as the economy improves. So the year ahead will remain difficult for many New Zealanders.

Energy sector moves will benefit consumers

Measures to improve the New Zealand electricity system will give consumers confidence that power bills will not keep skyrocketing.

Our reforms, introduced this month, will also increase security of supply, and ensure effective and streamlined governance.

Power bills climbed rapidly during the previous government's term, well above the rate of inflation. We also faced many power shortages in dry years.

Among our initiatives is a requirement for generators to compensate consumers if consumers are asked to save electricity through a national conservation campaign.

The Electricity Industry Bill passed its first reading this week and has been referred to a select committee for public submissions. The Bill will improve retail competition, while ensuring that signals for investment in new generation are clear.

Helping prevent child abuse

We are taking action on preventing child abuse.

The statistics in New Zealand must change. Vulnerable young babies and toddlers are at greatest risk of abuse, as they are completely dependent on the adults who care for them.

The "Never, Ever Shake a Baby" campaign, launched on 6 December, is part of a wider programme to protect young children. We are starting with this multi-media campaign, raising awareness about the vulnerability of young children, and making sure every New Zealander understands why you must never, ever shake a baby.

We need every New Zealander to take a stand on this issue, and look out for the children who can't look out for themselves.

Electronic road user charges will cut costs

National is working hard to reduce compliance costs across industry.

Moving to electronic road user charges is another concrete example of a simple change that will bring real benefit to the transport industry, and to the economy.

Trucking companies will be able to replace mechanical hubodometers and paper licences with electronic distance recording and electronic licences from next year.

These and other steps that we are taking in transport will reduce compliance costs for the transport sector, and help to lower the costs for exporters to get their goods to the market.

ACC levies set

We announced this month that levies will rise next year. However, these increases will be considerably less than those recommended by ACC.

These levy increases are necessary because the cost of ACC claims have increased 57 per cent in the past four years.

We're moderating the increases by pushing out the full funding date to 2019, pulling back on extensions to the scheme made by the previous government, and putting in place a wide range of cost-saving measures.

Setting the levies has been a difficult balance between minimising the cost increases and families and businesses, keeping the pressure on ACC to better manage its costs, and ensuring ACC's long-term sustainability.

These changes will help get ACC back on a more sustainable path and protect our 24/7, no-fault accident insurance programme.

Every fish counts

Four million guardians - this is the way we should be thinking about New Zealand's fisheries this summer.

We are all privileged to have access to one of the world's most abundant and well managed fisheries. With this privilege comes responsibility - know the rules, ask yourself whether you really need all those fish - and return fish to the water in a way that will ensure their survival.

This is the message from the Ministry of Fisheries' summer education campaign.

Summer is the time when Fishery Officers see many New Zealanders in their aquatic environment. Fishery Officers and Honorary Fishery Officers are out and about helping and supporting the 4 million guardians of our fisheries.

This Government is committed to supporting their efforts as we work together to sustain and enhance our fisheries and ecosystem.

I take this opportunity to wish you a very happy Christmas and a safe and fun filled New Year…

…and to assist, I've put Santa on a tight budget!

Kind Regards,

Bill English MP
www.billenglish.co.nz

The Government's firm focus in 2010 will be achieving higher economic growth and giving businesses the confidence to invest and create jobs, Finance Minister Bill English says.

Responsible management of the Government's finances will also be essential, with another six years of forecast Budget deficits.

"Growth matters because it creates jobs, increases incomes and improves the living standards of New Zealand families," he said today in issuing the Half-Year Economic and Fiscal Update and 2010 Budget Policy Statement.

Updated Treasury forecasts show that both economic growth and the fiscal outlook are a little better than forecast in the Budget in May.

"This reflects the fact that the global economy has stabilised and the success of significant Government initiatives in the past year to fight the recession.

"However, that does not mean that all of the problems of the recession have passed - risks remain that growth could weaken again," Mr English says.

"Unemployment is forecast to peak sooner and lower than previously predicted - 7 per cent in early 2010 as opposed to 8 per cent in the second half of 2010. However, it is likely to remain at elevated levels throughout 2010, even as the economy improves. So the year ahead will remain difficult for many New Zealanders."

Mr English says the Government's fiscal position also remains challenging.

"Budget 2009 stopped the growth of low-value Government spending and provided a credible programme to contain debt. Even so, the forecast operating deficit for 2010/11 is $6.7 billion and the Government's accounts are not expected to return to surplus until 2016.

"This is despite the forecasts assuming long-term spending restraint and an upwards creep in average tax rates caused by increasing numbers of taxpayers entering the top tax brackets. There is little room for slippage."

The Government has a significant economic programme, which has already helped New Zealand come through the recession in better shape than many other countries.

The economic programme includes:

• Investment in productive infrastructure
• Removing red tape and improving regulation
• Supporting business innovation and trade
• Improving education and lifting skills
• Lifting productivity and improving services in the public sector
• Strengthening the tax system

"We are now building on that programme to ensure New Zealand achieves a step-change in its economic performance," Mr English says.

"Budget 2010 will set out the next steps of the Government's growth strategy while continuing the emphasis on sound public finances."

SUMMARY OF ECONOMIC AND FISCAL FORECASTS

The Treasury's latest monthly economic indicators today provide a mixed view of the economy and reinforce risks around the shape of the recovery, Finance Minister Bill English says.

"As we have said, there are some positive signs as we emerge from the recession, but the road to recovery will be bumpy.

"The Government understands the challenges facing households and businesses. That's why we've taken a comprehensive set of measures to firstly help New Zealanders through the recession and to then build economic growth over the next three to five years," he said after the economic indicators for November were issued today.

"It will take time for the number of people employed to increase - even as economic growth picks up. That means households will respond reasonably cautiously to signs of recovery.

"As we saw last week in the Government's financial statements for the first four months of the financial year, the deterioration in the labour market and challenging business conditions are also having a significant impact on Government tax revenue."

It was encouraging that business confidence had improved, with firms' expectations of their own trading conditions at their highest level since 2002.

"Overall, these latest economic indicators confirm there are risks surrounding the recovery. In addition to weak employment and salary and wage growth, a fall in capital goods imports in the past year points to weak business investment activity in the coming year.

"With this in mind, the Government remains focused on doing everything it can to support existing jobs and giving businesses the confidence to invest and create new jobs," Mr English says.

Economic indicators: http://www.treasury.govt.nz/economy/mei/nov09

The fiscal challenges facing the Government as the economy comes out of recession are again highlighted in the Crown's financial statements for the four months to 31 October, Finance Minister Bill English says.

A feature of the latest data is the impact of lower-than-expected business profits on tax revenue - particularly indications that lower company profits in 2009 will flow through to reduced 2010 tax revenue.

"This lower tax revenue was the main contributor to the operating balance before gains and losses (OBEGAL) being in deficit by $3.2 billion in the four months to 31 October - $1.2 billion larger than forecast," Mr English says.

"It's clear that the impact of the recession will be felt by many businesses and, in turn, on the Government's books for some time. This will influence our decisions around both revenue and spending.

"It means there will be little or no new money for government departments and ministries for the foreseeable future - and certainly not at the unsustainable rate of increase provided by the previous government.

Mr English says this challenging environment reinforces the real value of the significant economic programme the Government already has in place.

"Without this balanced programme, there is no doubt that New Zealand would have emerged from the recession in much worse shape than it has, at the cost of thousands more jobs and even more debt."

The Budget Policy Statement and Half-Year Economic and Fiscal Update on 15 December will set out the Government's economic framework and update forecasts for 2010 and beyond.

"They will help shape our decisions for Budget 2010, as we focus on getting a better performing economy that supports more jobs and higher incomes."

The Government will consider the 2025 Taskforce's recommendations and make practical decisions about them, Finance Minister Bill English says.

"The Taskforce's report issued today raises some interesting ideas and challenges, which will hopefully generate constructive debate about options for improving New Zealand's economic performance.

"Having steered the economy through the recession in better shape than many had predicted, the Government is now focused on getting a step change in New Zealand's economic performance over the next three to five years.

"We must consider a range of options if we are to get the investment, economic growth and new jobs needed for that to happen.

"Having said that, this Government is pragmatic. And any decisions about key economic policies must meet the tests of fairness and equity.

"Where we specifically campaigned on doing certain things, we're not going to break our word."

Mr English notes that the 2025 Taskforce is one of several review groups that have already reported to the Government or will report back in the next month or so. The others cover regulatory responsibility, taxation, infrastructure and capital markets.

"As with the 2025 Taskforce, they have all gone about their work in a transparent way and encouraged public input," Mr English says. "The Government welcomes their contribution to policy debate.

"We will consider their ideas - and others - over coming months as we work towards making decisions for Budget 2010 and beyond."