By Alex Tarrant
The desired rebalancing of New Zealand's economy has not been as sufficient as the government would like, Finance Minister Bill English says.
Appearing before Parliament's Finance and Expenditure select committee, English put the frustrations down to the high New Zealand dollar and the redirection of resources to the Christchurch rebuild.
That meant the tradable sector was not getting the returns and capital it desired for growth.
It was an "open question" as to how much the economy would rebalance over the next few years, English said. Growth over the short-term, while set to be "grumpy" over the next few years, would be boosted by a still relatively high terms of trade, and a pick up in the housing market.
English said he was more optimistic than the Treasury forecasters about New Zealand's current account deficit track, which is set to widen over the next four years from 3.6% of GDP in the year to March 2011 to 6.7% of GDP in 2016.
On rebalancing the economy towards the tradable sector, English said there were trade offs which needed to be discussed, like regional councils limiting pastoral production as they tried to improve water quality. There needed to be the regulatory environment in place to assure people that growth in the primary sector would not be reckless in regard to the environment. Likewise with growth in the mining sector, English said.
These were issues which needed to be grappled with in the short-term to ensure the long-term outlook was positive.
English said the government expected its 2010 tax switch to be beneficial following a 5-7 year period.
Meanwhile, there was more uncertainty about the revenue side of the Budget, while the expenditure side was more predictable, English said.
English said expenditure control had become reasonably embedded in the public service. On the revenue side, there were uncertainties such as the direction export prices would move, and whether households would increase spending or keep paying down debt over the next few years.
He said Treasury was expecting periodic crises stemming from Europe over the next decade at least.
However, "one way or another they will muddle through."
(Updates with video of English)