In this edition of Focus on Finance I talk about the Government's four main economic priorities, the Budget Policy Announcement, some good news about growth, the mixed ownership model and a few upcoming milestone economic events.
SETTING OUR PRIORITIES
Click here to watch my latest briefing video on YouTube.
In its first term, the Government showed it could deliver strong and stable government in difficult times. As the Prime Minister said last month, the next three years will be about rebuilding and strengthening the economy. We have set out a clear and comprehensive economic programme to achieve that. In particular, we want a more competitive economy that sells more to the rest of the world and supports more jobs and higher incomes.
Compared to a lot of other countries, we're in pretty good shape. To ensure we grasp our opportunities - and withstand the global challenges that will continue to come our way - the Government has set out a clear economic plan for this term. Our main priorities are:
- Responsibly managing the Government's finances.
- Building a more productive and competitive economy.
- Delivering better public services within tight financial constraints.
- Rebuilding Christchurch.
For more information read my recent speech outlining our economic priorities.
BUDGET POLICY STATEMENT
Budget 2012 will be another challenging Budget. But despite updated forecasts showing a somewhat weaker global environment, New Zealand's economic outlook remains positive. The Government is still on track to return its books to surplus in 2014/15, our terms of trade are expected to remain high, our largest trading partners are among the stronger-performing countries in the world and the Christchurch rebuild will provide a boost to growth over coming years.
Of course there are risks, particularly offshore, and we are continuing to monitor them closely, but as a Government we are focused on what we can do to make our economy more competitive. That's why we've set out a comprehensive policy agenda for this parliamentary term. Budget 2012 will be about sticking to that plan. For more information read my media statement, or the Government's full Budget Policy Statement.
TIGHT SPENDING DISCIPLINE REQUIRED
Lower Government spending has offset lower than expected tax revenue, helping keep the Government's finances on track in the six months to 31 December 2011. However the Treasury is expecting corporate tax revenue to fall below forecast in the second half of the financial year, in line with the weaker global outlook.
That makes getting back to surplus an even bigger challenge, but we are committed to keeping a tight lid on spending and putting in place policies that make our economy more competitive. Balancing the books and returning to surplus is one of the most important things the Government can do to rebalance our economy towards savings and exports. For more information read my media statement, or the full Financial Statements of the Government.
MIXED OWNERSHIP ON TRACK
Last week I delivered a speech on mixed ownership to the Victoria University Faculty of Commerce and Administration. Three months on from the election work is well underway on selling minority stakes in selected SOEs to New Zealanders. The Government has chosen Mighty River Power for the first Initial Public Offering (IPO). We've completed consultation with Maori on the removal of the four state-owned energy companies from the SOE Act and the Government will introduce new legislation once it has decided how its Treaty obligations should be reflected.
More generally, the reasons for proceeding with mixed ownership are the same as when we announced our intentions last year:
- It will free up $5-$7 billion the Government won't need to borrow on volatile overseas debt markets.
- New Zealanders will be at the front of the queue to invest in big Kiwi companies at a time when much of their growing savings are sitting passively in term deposits as investors turn away finance companies and highly leveraged property.
- The greater transparency and oversight from being listed on the stock exchange will be good for the companies themselves.
THINGS TO LOOK OUT FOR
- 8 March: Reserve Bank review of the Official Cash Rate and release of its latest Monetary Policy Statement.
- 21 March: Statistics NZ release balance of payments figures for the three months to 31 December 2011.
- 22 March: Statistics NZ release gross domestic product figures for the three months to 31 December 2011.
Hon Bill English