The Government has taken several steps to ensure New Zealand can minimise any fallout from the United States’ ongoing debt problems, Finance Minister Bill English says.

“Despite a compromise deal being reached in Washington, there is no doubt the situation in the United States is serious – both for the US itself and for the global economy,” Mr English says.

“However, New Zealand is relatively better placed than many other countries to manage in what will remain a pretty uncertain global environment. We’re getting on top of debt by keeping it below 30 per cent of GDP and we will be back in surplus by 2014/15.

“Over the next few years, we have an opportunity to build on solid foundations for faster growth and more jobs.

“Our financial system and our economy are both in better shape than a few years ago to manage global market uncertainties. This reflects improvements in market regulations and an economy that is growing, with households, businesses and the Government less dependent on debt.

Since 2008, the Government has:

• Turned back 2008 forecasts of never-ending deficits and soaring debt by setting a path back to budget surplus by 2014/15. As a result, net Crown debt is expected to remain below 30 per cent of GDP.
• Front-loaded its borrowing programme during favourable market conditions, which will cover the Government’s obligations over coming months should markets seize up as they did in late-2008.
• Introduced the biggest reform of the tax system for 25 years, which rewards work and savings, discourages borrowing and consumption and significantly tightens tax rules on property speculation.
• Overhauled capital market regulations and established the Financial Markets Authority, giving investors confidence in market rules and enforcement.
• Brought non–bank deposit takers under Reserve Bank supervision, with minimum capital adequacy and credit rating requirements.

In addition, the Reserve Bank has:

• Introduced new core funding requirements for banks, which require them to have 70 per cent of their funding from stable sources such as retail deposits and long-term wholesale funding.
• Ensured that in another financial crisis, the Bank can supply temporary liquidity to sound institutions.

“Having cushioned New Zealanders from the recession, we have taken responsible decisions to restrict the build up in government debt, get spending under control and put the Government’s finances in order,” Mr English says.

“We are also building solid foundations for faster growth and more jobs based on savings, exports and productive investment. The Treasury forecasts the economy will grow by an average 3 per cent a year over the next four years and create 170,000 new jobs.

“The high Kiwi dollar is undoubtedly a headwind for New Zealand exporters – reflecting weakness in the US dollar as well as a perception in financial markets that New Zealand remains a safe place to invest.

“It means we need to do everything else we can to build on the resilience and higher business confidence we’re seeing. That includes keeping on top of debt and building a faster-growing economy.”

Original question: From Lindsay McClean (@Kobe24888 on Twitter):  Hi Bill Do you intend to reduce the GST rate back to 12.5% or lower when circumstances allow?

Response: Q&A with @Kobe248888 No. We put up GST and cut income tax to encourage NZers to spend less and earn and save more. More info: http://bit.ly/rk32IZ

If you're on Twitter, ask your questions!

Finance Minister Bill English today welcomed a largely positive review of the Government Superannuation Fund Authority (GSFA).

The independent review, which is required every five years, was carried out by JANA Investment Advisers and tabled in Parliament today.

It is the second review since the GSFA was set up in 2001 to administer the Government Superannuation Fund (GSF), which manages superannuation entitlements for about 68,000 current and former civil servants.

"The Government Superannuation Fund has $3.3 billion invested, so it makes up a significant part of the Crown’s balance sheet. It is important those assets are well managed," Mr English says.

"The reviewers found the GSFA meets best practice in all essential areas, has effective board and management oversight, appropriate policies and practices, strong risk management and effective decision making.

"This is reflected in recent GSF results which show it achieved its performance benchmark for five-year returns.

"The review identified some opportunities to improve policies and practices, particularly around the level of information provided to the GSFA board on investments. The review notes these recommendations should be seen in the context of an overall positive report card.

"The Government will discuss these recommendations with the board," Mr English says.

The review is available at:
www.treasury.govt.nz/publications/reviews-consultation/gsfa

The Government is introducing legislation to further tighten the rules for non-bank deposit takers (NBDTs) – another step in lifting investor confidence in our financial institutions, Finance Minister Bill English says.

The Non-Bank Deposit Takers Bill introduces licensing requirements and strengthens the Reserve Bank's powers, completing a new regulatory regime for NBDTs. It will be introduced to Parliament next week.

"From 2006, deposits of about $8.6 billion were put at risk by finance industry failures," Mr English says. "A key focus of this Government has been supporting measures to ensure the right protections are in place to lift investor confidence.

"Last year we implemented the first stage of prudential regulation for non-bank deposit takers – bringing in rules around credit ratings, risk management, governance, capital, related party exposures, and liquidity.  

"This bill completes that regulation. It gives the Reserve Bank the power to remove directors and issue directions in certain circumstances."

The bill will require NBDT directors to notify the Reserve Bank if a director or senior officer triggers new prescribed suitability criteria. The Bank will have the power to remove those individuals.

The bill is expected to become fully effective on 1 June 2013, after a one-year transition period to enable existing NBDTs to meet the new licensing rules.

"This is part of a suite of measures designed to lift investor confidence in our finance sector and capital markets - we've established the Financial Markets Authority, put in place a new regime for financial advisers, required licensing of trustees and auditors and strengthened disclosure requirements.

"We've also outlined our plans to extend the mixed ownership model to some state-owned enterprises to further lift confidence and invigorate our markets by providing fresh opportunities for Kiwi investors," Mr English says.

ECONOMIC GROWTH PICKING UP PACE

Click here to watch my latest video briefing on YouTube

It's pleasing to see the economy grew by 0.8 per cent in the March quarter, despite the devastating Canterbury earthquake on 22 February. This better than expected result shows the economic recovery is picking up pace. It also shows the resilience of Cantabrians and the wider New Zealand economy.

Our programme has been focused on rebalancing the economy towards savings and exports, so it's good to see exports in the March quarter up almost 1 per cent and imports down 2.4 per cent. Looking forward, I'm confident that growth will continue to pick up as the benefits of the Canterbury rebuild, near record commodity export prices, low interest rates and improving levels of savings and confidence begin to flow through to the economy. For more information read my media statement.

IMPROVING NEW ZEALAND'S INFRASTRUCTURE

This month I released the Government's National Infrastructure Plan. Since becoming Government we've increased funding, cut red tape to ensure major projects get built faster and taken steps to improve how we manage our existing infrastructure and plan new projects.

The National Infrastructure Plan is the next step in ensuring we get the most out of our infrastructure programme. It shows the large investment we have in the pipeline - about $17 billion over the next four years, even before counting the $5.5 billion set aside for rebuilding Canterbury, or investment by SOEs like Transpower. Looking ahead, it sets out a 20-year strategic vision for New Zealand's infrastructure, identifies challenges, outlines the Government's priorities and puts in place an action plan to help improve planning and co-ordination. For more information read my media statement.

CLOSER TRANS-TASMAN TIES


Minister Swan and I exchange an All Black tie and a Wallaby beanie ahead of the Rugby World Cup.

Last week I met Australian Deputy Prime Minister and Treasurer Wayne Swan to further strengthen trans-Tasman economic and regulatory co-operation. New Zealand and Australia are committed to a Single Economic Market to stimulate business activity, drive job creation and improve the environment for doing business on both sides of the Tasman.

After the meeting Minister Swan and I released a stocktake showing the steps taken towards the creation of a Single Economic Market between the two countries since an outcome framework was announced in August 2009.

For more information you can read our media statement and stocktake.

EARLY SIGNS OF PROGRESS IN REINING IN THE DEFICIT

The latest Government financial statements show some early signs of progress in getting the deficit under control. The operating deficit before gains and losses for the 11 months to 31 May was $1.3 billion below forecast due to higher than expected tax revenue and lower expenses. This means the deficit
could come closer to $16 billion for the year to 30 June rather than the forecast $16.7 billion.

This is still extremely large and needs to be reduced. That's why the Government has set out a credible and faster path back to budget surplus by 2014/15, when we will start repaying debt. If possible, we would like to do even better than that by continuing to manage our costs and building a faster-growing economy. For more information read my media statement.

THINGS TO LOOK OUT FOR

• 28 July. The Reserve Bank will issue its latest Official Cash Rate review.
• 4 August. Statistics New Zealand will issue the Household Labour Force Survey, which contains official unemployment figures.

Regards,

Bill English
Finance Minister

www.billenglish.co.nz
www.facebook.com/billenglishmp

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Acting Prime Minister Bill English has condemned the twin attacks that are reported to have killed at least 80 people in Norway and left many more injured.

“I’m shocked and saddened at the news of the bombing and shootings,” Mr English says. “New Zealand joins with other countries in condemning these attacks on innocent people. Our thoughts and condolences are with the people of Norway at this time.”

A bomb blast ripped through the government district of central Oslo earlier today and a gunman later opened fire on young people at a youth camp on a nearby island.

“At this stage, there are no indications that any New Zealanders have been caught up in either incident. There are 61 New Zealanders registered as being in Norway and our embassy in The Hague, which is accredited to Norway, is in the process of making contact with them to confirm their wellbeing.

“In the meantime, we advise them to follow instructions issued by the local authorities and exercise a high degree of security awareness at this time,” Mr English says.

July 2011. Finance Minister Bill English talks about the "lifting sense of confidence" that's developing in the business community, the remarkable growth over the last quarter, and evidence of genuine resilience - particularly in the greater Christchurch region.

Finance Minister Bill English will attend the Pacific Island Forum economic ministers’ meeting next week in Apia, Samoa.

The meeting is expected to focus on how to increase growth and broaden economic activity in the region.

"New Zealand places huge importance on the region's continued growth and development," Mr English says.

"I'm very keen to hear other ministers' views on how we can lift sustainable economic growth in the region, ahead of the Pacific Islands Forum in Auckland in September.

"Stronger growth raises living standards and supports stability. We want to ensure the forum meeting in Auckland helps achieve that.

"I will also be highlighting the opportunity the Rugby World Cup presents for Pacific businesses and for the region to showcase itself to the world," Mr English says.

Ministers are also likely to discuss how to improve public finance management, development co-ordination and revenue collection across the region.

The meeting runs from 19-21 July.

Just as the economy is gaining momentum, the last thing New Zealand needs is more taxes and more debt, Finance Minister Bill English says.

“The economy is really gathering momentum, as we saw in the encouraging GDP data today showing the economy grew significantly faster than expected in the March quarter despite the earthquake,” he says. “More taxes and more debt under Labour would put that at risk.

“New Zealanders have a clear choice: Labour wants to take New Zealand backwards with more taxes, more spending and more debt. National will take the country forward by growing the economy, getting back to surplus by 2014/15 and repaying debt.

“Labour has clearly learned nothing from its failed policies of the past. Having left New Zealand with forecasts of ever-rising debt and permanent deficits when he was kicked out of office in 2008, Phil Goff now wants to go back and do the same all over again.

“After making lavish spending promises over the past two years, it’s had to come up with a hodge-podge tax grab that will be good only for the armies of bureaucrats and tax accountants needed to administer it.

“Even on their numbers - and with no accounting for their spending promises - Labour would borrow more every year until 2018/19.

“It would also have six income tax rates, a GST that applies to some things but not others, a big gap between the company rate and the top tax rate and a capital gains tax on productive industries with a maze of exemptions that raises virtually no revenue in the first few years. All of this would encourage tax avoidance.

“Instead of more taxes, New Zealand needs more taxpayers. Instead of growing the Government, we need to grow the economy,” Mr English says.

Considerable progress has been made in further strengthening trans-Tasman ties, New Zealand Deputy Prime Minister and Finance Minister Bill English and Australian Deputy Prime Minister and Treasurer Wayne Swan said.

After talks in Wellington today, the ministers released a stock take showing the steps taken towards the creation of a Single Economic Market between the two countries since an outcome framework was announced in August 2009.

New Zealand and Australia are committed to a Single Economic Market to stimulate business activity, drive job creation and improve the environment for doing business on both sides of the Tasman.

The stock take shows the important progress made in converging accounting and financial reporting standards, aligning regulatory regimes, and coordinating the enforcement of consumer laws.

Moving towards a seamless trans-Tasman economy will deliver benefits to consumers and businesses in both countries.

The ministers shared updates on their respective economies, focusing on domestic developments and how international trends are impacting on economic growth. 

They also discussed how their respective economies are recovering from recent natural disasters: the Canterbury earthquakes and flooding and cyclones in Queensland.

The ministers met Climate Change Minister Nick Smith to discuss climate change policy and the recent announcement of Australia’s Carbon Pricing Mechanism. This included how the two schemes might be integrated, with ministers noting that a senior officials’ working group on the potential linking of the two mechanisms will progress the issue. 

The ministers updated each other on the progress of implementing arrangements between the two countries on trans-Tasman retirement savings portability. Australia will continue to work towards enacting the legislation necessary for the new regime and will work closely with New Zealand officials to finalise the establishment of the scheme.

The talks concluded with a discussion with a small group of business leaders, where they shared views on the future direction the trans-Tasman relationship. 

To view very large chart outlining: Progress of Single Economic Market Outcomes Proposals announced by the Australian and New Zealand Prime Ministers on 20 August 2009, click here