Finance Minister Bill English admits rebalancing of NZ economy towards exporting yet to happen due to high NZ$; also sees tax switch benefits taking 5-7 years

Finance Minister Bill English admits rebalancing of NZ economy towards exporting yet to happen due to high NZ$; also sees tax switch benefits taking 5-7 years

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)

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However, "one way or another they will muddle through."
And so will NZ, when people comprehend this and take appropriate corrective action: "There is not a single politician who hopes to let the free markets work and be reelected." Read more

They are right to be concerned about Revenue if what I'm hearing about 2012 tax returns from accountants is the general trend....

With rising costs outstripping taxable profit/income for many businesses/individuals little else can be expected.
Low to negative real interest rates absent other state controls are never a recipe for generating taxable income.

So let's get this right:  if every economy Exports it's way to recovery, simultaneously, we are all Saved!
Bit like the Keynesian delusion, shurely:  only works if'n yer the Only one (or of a very select Few countries) who try the same trick at the same time.
What am I missing here?

Well to start with you miss this is nothing to do with Keynes on many levels....from that delusion alone I assume you will miss most things........but thats your problem.
But yes we cant all export to everywhere else.....someone(s) has to take the fall....
In NZ terms the rich are the ones with and will keep tehir money so little NZ should be selling high quality goods into that market....or any markets where we have baby formulae.

The fact is not all are exporters so it's still workable IF you can get other economies to buy at the moment which is the big problem due to their debt levels. We have a few advantages as a nation. Food and raw materials is our greatest hope as they are always needed. Just need to get people off the property ponzi scheme mentality 
But.......they (governments) all continue believing more debt= growth. Let's keep building that perpetual motion machine called our global monetary system where the only ones making massive profits are......................banks 

Easy, Bill should approach Gina Rinehart and Clive Palmer. They both might be interested buying out NZ..

I like the 5-7 year timeframe!  It excuses present politicians from any accountability, since it is beyond the life of the present National govt, & the next one (should they win the next election).  Similar to their argument with age of entitlement to super, really.
In reality, the so-called "rebalancing" is a joke.  How can a little bit of tinkering ensure that NZ re-focuses on the tradable & export sectors?  Especially when the govt rejects a CGT out of hand, & borrowing from overseas starts burgeoning again, to feed a renewed housing bubble in Auckland?
Talk about "borrow & hope"!  Its Walt Disney type fantasy, really.

Send us your cheap....your tyred rubbish...your huddled messes packed in floatable containers... your wretched messes from your teeming shores...yearing to belong to me....I raise my " warehouse " lamp...and offer the Golden door to blind consumption.
English ..! you may be a victim of the circumstance...bu you are a bare faced liar to say there is no reaonable grounds for intervention.....not to mention a nincompoop for  using "muddle through" as some kind of reassurance to your Governance,..........besides it's John Boys phrase ( I'd expect that from him), get your own lame excuses, be orignal if you can't be competent.

Settle down and get in behind!


Looking at that graph, you could rightly say this government is a total disaster from NZ's economic perspective.

All they have done is unbalanced the economy much more than it was before.

I think that would be an over intrepertation of the data (graph). Your political colours clouding your judgement I think. The rot set in between 2003 -2008. And who was in govt. then?

..... the problem is , if the economy does get back on track in the next 5-7 years , those wastrals from NZ Labour who spent it all last time ..... will be back in power on time to repeat Clark & Cullen's abysmal performance ...
And we're still carrying the burden of seriously dopey policies such as WFF & interest-free student loans .....
..... not to mention rental supplements , and all the other vote bribing pork ....
Wolly for P.M. !

YaY..! for Wolly....come on me old Gypsy camper...dust off that 70's pinstripe a quick swig of aftershave and get out there on the hustings....campaign strongly on unpaid permanent contraception for current Ministers and their email connections......and how you think John Boy should be honest with the public about his gayness......because after all there is nothing wrong with it.
That said GBH of the things we have to stop doing is being reflective about successive administrations( shit in a handbag) legacies.
The failure here is for any change in attiude regarding their own self importance to one of remembering the job is in The Public Service..(contadiction in terms though it has become) to serve the public interest ...not pander to it when it serves only the purpose of vote retention.
I like to see more dictation of policy coming openly from say the New CEO of the ANZ here...hmmm name escapes me, but anyhoo yes more honesty in regard to policies they require the Nats to implement...... for the greater good of course.

David B,
in my opinion the rot set in when Treasury got the ear of successive governments from Rodger "blind faith" Douglas on.
For mine, Neither Labor or National have proven to be anything other than a bunch of bozos who have been led around by Treasury

Our failure to address speculative play on the NZ dollar is killing our exports.
Our tax cuts are proving the "trickle-down theory" is a nonsense.
"Uncertainty" is a good word to substitute for "decline" when referring to forecast commodity prices.
We now realise that the Christchurch disaster is proving the 'broken window fallacy'  holds true (destruction, and the money spent to recover from destruction, is actually not a net-benefit to society).
Neither is our low wage economy a net benefit.
As per a possum in the headlights, our only hope for anything that looks like "growth" depends on a housing market recovery (note to self: don't mention the current account).
Innovation is out - incrementalism is in - the question is how to "sell" muddling as a "vision" to the electorate?
I wonder if this might cost me a knighthood?
I wonder if I should sell some properties now.
Perhaps I should move the family to Aus.

Well said Kate......The big Four Aus banks have had it their own way for too long ...time to trim some of their repatriated profits....among other things.

Because Snippy the big four know what happens when you grow too far too fast...kabloooowie..!
sides which how they gonna take over all the mortgages....n..underwrite em ....n...socialise em...
 But yes it would be better to have strong competition for the big four by more than just Kiwibank.

"Perhaps I should move the family to Aus"
Sorry, standing room only now..  Nothing else to see in Aus.. move along!

Snippy .....over the years and many theories on JFK's demise, the one I most favour for a hit on that magnitude is because he was preparing the paperwork to return the Fed to the people...that would be enough to get him and a million just like him killed...and Johnson would not have batted an eyelid.

... aha , so if wasn't a " hit " organised by the American-Germanic Food Products Commission ?
Kennedy was gonna repeal the tariffs on imported Sauerkraut & allied Brassicae products ....
... which  means the American-Korean Kimchi Producers Co-op are still suspects...
... back to the North Koreans then .... I knew it !

Well that I do not know GBH...but  Sauerkraut as reason for the risk of be nuked in retribution, I should have thought it  hardly worth the effort......after all there is no end to the receptible markets awaiting fresh rotten cabbage.
 Kennedy was gonna do a lot of things...! at least he got Marilyn off the to do list before his untimely departure.

Christov, you've been at the JamesJoyce again, eh, m8.
But good ranting, nonetheless.

I'm so sick of this 'smurky jerky' talking utter shite. Bill English is a traitor. No excuses for screwing exportors just to save the NZ  property bubble 

Why does Bill English act like he's an innocent bystander? Bill, you're the Minister of Finance in case you've forgotten. 
Lines like "The desired rebalancing of New Zealand's economy has not been as sufficient as the government would like", or "It was an "open question" as to how much the economy would rebalance over the next few years", suggest that he thinks he is not in a position to influence these things at all. I'm not sure whether to be embarrassed for him, laughing at him, or very angry with him. I'm incredulous that a Finance Minister pretends this rebalancing of the economy towards the tradeable sector (and so to a less distastrous Greek like Current Account) is not within his gambit to do something about. Yet he correctly identifies that the high NZ$ is a key cause of the problem. 
Bill, the problem's 90% within your control. The UK government, through the BOE, the US Fed, the Swiss Central Bank; the Japanese government, absolutely the Germans, the Chinese all understand what a key tool their exchange rate is. The fact they are all bigger than us actually makes their job harder; they have to fire financial nukes to make a dent, we would just have to fire a couple of 2nd world war shotguns and we'd be there.
So Bill, most certainly the excuses don't wash for a second; get off your backside and start addressing the issue. Start with the Reserve Bank act is a clue. Tinkering with water quality rules is trivial tinkering, and not even very good tinkering it sounds like to me.

Hear, hear!!!!

What we mostly need right now is a Free Trade Agreement with ourselves.
We should convert all of the "Tradeable Sector" (currently suckers) factories to "Import Substitution" factories - you know - maybe even making our own FOOD.
We have been told  - no instructed - that Import Substitution is the best path at least 4 times in the past 50 years! 
My (former) successful exporting factory is at present mothballed because of zero orders - just give me the nod Bill and the conversion to Import Substitution will start at midnight.

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