Despite the devastating Canterbury earthquake on 22 February, the economy grew by 0.8 per cent in the March quarter amid signs that the pace of the recovery is picking up, Finance Minister Bill English says.

Statistics New Zealand today confirmed gross domestic product (GDP) has grown in seven out of the past eight quarters. The latest result took GDP growth to 1.5 per cent in the year to March 31.

The March quarter growth was 1.1 per cent higher than Treasury's Budget forecast. Statistics New Zealand also revised growth upwards in the previous three quarters.

“It’s pleasing to see growth picking up pace, after a difficult few years going right back to the domestic recession that started in early 2008,” Mr English says.

“The earthquake in February was devastating for the people of Canterbury and caused major disruption to the region's economy, especially coming so soon after the previous large earthquake in September. Today's result shows the resilience of Cantabrians and the New Zealand economy as a whole.

“The Government has moved swiftly to provide financial certainty for rebuilding Canterbury, and this will have a positive impact on the economy as this work gets underway.

“The rebuild, along with near record commodity export prices, interest rates at 40-year lows, improving business and household confidence, lower household debt and the upcoming Rugby World Cup, give us confidence in the outlook for New Zealand’s economy.

“We’re also confident this recovery will be built on a sound platform of higher savings, exports and productive investment, rather than the excessive borrowing, consumption and government spending of much of the past decade.

“That will remain the focus of the Government’s economic programme,” Mr English says.
 

The next steps in progressing the Trans-Tasman Single Economic Market will be on the agenda when Finance Minister Bill English meets Australian Deputy Prime Minister and Treasurer Wayne Swan this week.

The ministers meet in Wellington on Thursday, before they share their views on the economic outlook for Australasia in speeches to a Trans-Tasman Business Circle lunch in the city.

“I’m looking forward to again catching up with Treasurer Swan to discuss a number of issues of mutual interest to New Zealand and Australia,” Mr English says. “Australia is our closest international and economic partner – it remains our largest export market and an important source of investment.

“I am keen to discuss next steps in the Single Economic Market agenda, and I would like to hear Mr Swan’s perspectives on the impact of the global economic situation on Australia and its economic outlook.

“At the same time, I’ll update him on our Canterbury earthquake recovery programme and, more broadly, outline our programme for building faster economic growth and getting back to budget surplus.”

Mr English and Mr Swan will also meet a group of New Zealand company chief executives to discuss how the Trans-Tasman economic partnership can be further strengthened.

The Government’s financial statements for the 11 months to 31 May show some early signs of progress in getting the deficit under control, Finance Minister Bill English says.

The operating deficit before gains and losses was $10.8 billion for the 11 months - $1.3 billion below forecasts due to higher than expected tax revenue and lower core Crown expenses.

“Assuming the Government’s share of the Canterbury earthquake costs for the current fiscal year are close to forecast, the OBEGAL deficit of $16.7 billion set out in the Budget is now expected to come closer to $16 billion for the year to 30 June,” Mr English says.

“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.”

In the 11 months to 31 May, GST made the largest contribution to the higher revenue, coming in $512 million or 4.2 per cent above forecast.

“Retail sales rose more than expected in the March quarter and more recent retail data suggests this pick up will continue,” Mr English says. “In addition, GST refunds were $260 million lower than expected – although this appears to be largely a timing issue that will reverse in coming months.

On the other side of the ledger, core Crown expenses were $770 million – or 1.2 per cent – below forecasts. This reflected mainly Treaty of Waitangi settlements, Working for Families tax credits, the Emissions Trading Scheme, the Canterbury earthquake welfare support package and early childhood education.

“Overall, the Treasury now expects tax revenue for the full year to be in line with – or even stronger than – forecast, and expenses to remain below forecast for the full year,” Mr English says.

The National Infrastructure Plan shows the Government will invest over $17 billion in infrastructure in the next four years, supporting thousands of jobs and setting a platform for growth, Infrastructure Minister Bill English says

"Central government will invest $7.6 billion on social assets like schools, hospitals, state houses and prisons over the next four years, $6.5 billion on roads and about $1.5 billion each on broadband and rail," Mr English says.

"In addition we've set aside $5.5 billion to rebuild Canterbury and state-owned enterprises are spending billions more upgrading their own assets.

"The plan shows New Zealand's infrastructure is generally improving, with less red tape, more major investment in the roading, rail, telecommunications and electricity networks and specific projects to support the Rugby World Cup.

"New Zealand faces some major challenges, including rebuilding Canterbury, but we remain committed to investment throughout the country and are continuing to look for new projects that lift productivity and growth.

"However we must manage our large asset base better and ensure future investment goes into areas that deliver the greatest benefits to the economy.

"Government assets are forecast to grow by $34 billion to $258 billion by 2015. Extending the mixed ownership model is one of a number of initiatives that will ensure government capital is allocated to where it is needed most.

"The National Infrastructure Plan is another step in that direction. It sets out the Government's 20-year infrastructure strategy, future challenges and the Government's priorities over the next three years. Those priorities are:

1. Working with stakeholders to rebuild Canterbury infrastructure.

2. Providing a comprehensive approach to investment in Auckland that is fair to all New Zealanders and helps implement the Government's responsibilities through the Auckland spatial plan.

3. Improving the management of government-owned social infrastructure assets, such as prisons, hospitals and schools.

4. Focusing transport investment on supporting exports through projects like the Roads of National Significance and better rail links to ports.

5. Improving the Government's ability to monitor performance across all infrastructure sectors.

"On coming into office, the Government moved immediately to unclog our economic arteries by boosting investment in productive infrastructure and improving the regulatory environment," Mr English says.

"We've invested heavily in the last three Budgets in infrastructure like schools and ultra fast broadband - alongside record investments in our electricity and State Highway networks.

"We've also improved the way the Government plans, consents and finances infrastructure by reforming the Resource Management Act, improving spending disciplines and making greater use of public-private partnerships.

"The National Infrastructure Plan delivers on our promise to ensure stakeholders have a better sense of the Government's intentions across a range of sectors so they can make their own decisions to meet future demand," Mr English says.

The next National Infrastructure Plan will be produced in three years. The latest plan can be viewed online at www.infrastructure.govt.nz/plan/2011.

Related documents:

The Government will investigate the feasibility of developing a Whole-of-Government Radio Network as a Public-Private Partnership (PPP), Infrastructure Minister Bill English and Police Minister Judith Collins announced today.

Over the past three years the Government has funded Police to build a digital radio network in Auckland, Wellington and Canterbury to replace their existing analogue network.

The Government is now considering how to replace the multiple radio networks used by law enforcement, public safety and emergency management agencies across the whole of New Zealand.

“An effective and reliable radio network is essential for high-quality law enforcement, public safety and emergency management,” Mr English says.

“New Zealand does not currently have a radio network that operates across all agencies. The current infrastructure is fragmented, ageing and is not managed in a co-ordinated way. That can make it harder for agencies to work together, particularly in a major emergency.

"We are taking a whole-of-government view towards any new investment, to see how we can get maximum value for money for taxpayers.

"Based on an initial business case, Ministers believe a PPP would be likely to introduce the best financial incentives to maximise performance and minimise cost," Mr English says.

Ms Collins says the importance of radio communication was demonstrated during recent major earthquakes in Christchurch.

"The Police digital radio network played a major role in the co-ordination of emergency services following the quakes,” Ms Collins says.

“The key benefits of a Whole-of-Government Radio Network are likely to be better interoperability, better security, improved voice clarity, enhanced safety features and improved coverage.

“The initial business case also found there would be benefits in terms of reduced cost of crime, less death and injury, reduced property damage and better financial efficiency.

“The options analysed in the business case were technology and vendor neutral – that means it will be a level playing field for all potential providers with options based on business needs and outcomes rather than a specific technical solution,” Ms Collins says.

Officials will now develop a second more detailed business case, which they are expected to submit to Cabinet early next year.

20 June briefing on the economy from Finance Minister Bill English in which he speaks about the growing confidence in the economy, why that confidence is well-placed and what the Government is doing to assist the recovery.

Improving New Zealanders’ knowledge of personal financial issues will help contribute to a healthier economy based on more savings and less debt, Finance Minister Bill English says.

“Better financial literacy is not only good for the economy – it also helps individual New Zealanders make better decisions about their own personal finances,” he said today in launching the New Zealand Centre for Personal Financial Education in Wellington.

“The new centre is consistent with the Government’s programme to move the economy away from excessive borrowing, consumption and government spending.

“We want to build faster growth based on savings, exports and productive investment. New Zealanders understand that challenge and we’re already seeing some early signs of progress, with households saving a bit more and paying down debt.

“The Government has taken several steps to encourage savings by reducing tax on savings and company profits, and providing extra resources to protect investors through the new Financial Markets Authority.

“In addition, the Government has confirmed it will offer New Zealanders minority shareholdings in four Government-controlled energy companies and Air New Zealand, should it win another term at the election in November.

“Kiwi investors – particularly those who lost money in collapsed finance companies – are telling us they want new quality investment opportunities,” Mr English says. “I would much prefer to be paying them dividends than borrowing more from foreign lenders and paying them interest.”

The Centre for Personal Financial Education, founded by Westpac New Zealand and Massey University, has created a certificate programme for personal financial educators and will undertake a 20-year study to identify why so many Kiwis struggle with their finances.

After-tax wages continue to rise faster than prices, Finance Minister Bill English says.

The real after-tax average wage increased 2.5 per cent in the year to March 2011, after accounting for all consumer price increases including food prices and the one-off rise in GST last October.

“Everyone’s circumstances are different, and we appreciate things remain challenging for many New Zealanders. But it’s encouraging to see that, on average, take-home wages continue to rise faster than prices,” Mr English told Parliament today.

“In the latest March year, the after-tax average wage grew 7.1 per cent in nominal terms and 2.5 per cent after adjusting for inflation.

“This means that since September 2008, after-tax wages have increased 17 per cent in nominal terms and 10 per cent after adjusting for inflation.

“That compares with real growth of just 4 per cent over the entire nine years to September 2008.”

“To put these figures into perspective, New Zealand’s 2.5 per cent increase in inflation-adjusted after-tax wages in the latest year compares with just 0.6 per cent real growth in Australia.”

The figures use data on average weekly ordinary time earnings from Statistics New Zealand’s Quarterly Employment Survey. This is the official series used to calculate the wage floor for New Zealand Superannuation. Comparable data is drawn from the Australian Bureau of Statistics.

“This Government is committed to helping New Zealanders get ahead, enjoy higher incomes and lower interest rates for longer,” Mr English says. “This will require continuing change, year after year, to put the economy on a more competitive footing.”

Click to download the Finance Minister's post-Budget presentation in PPT

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