Finance Minister is 'confident about the resilience' of the New Zealand economy, but warns supply chain issues could persist into next year

Finance Minister Grant Robertson says the Government's committed to achieving its target of producing a Budget surplus in 2025, but warns that "there are no easy decisions".

And he's also warning that the current global supply chain issues could persist into next year.

Robertson appeared before Parliament's Finance & Expenditure Committee on Wednesday to talk about and face questions from MPs on his May Budget.

The National Party in particular continues to characterise Robertson as a big spender who doesn't keep to financial targets.

Ahead of this year's Budget announcement Robertson had signalled that the projected return to surplus would come a year later (2025) than had earlier been indicated.

National's deputy leader and finance spokesperson Nicola Willis said given Robertson's past pattern, she asked how the projected return to surplus could be taken seriously, and was he committed to achieving it?

“Of course we are committed to reaching that surplus," he said.

"And I’m very confident about the resilience of the New Zealand economy to be able to do that. But I’ve also been a Minister of Finance through a global pandemic and I know that forces you…there are no costless decisions, there are no easy decisions. It forces us as a Government to be nimble and adaptable that’s what we’ve been doing…the proof is in the pudding."

National's Andrew Bayley inquired whether the Government's level of spending had contributed to inflation [currently 6.9%] and through that the need for people to be paying higher interest rates [the Reserve Bank recently hiked the Official Cash Rate by another 50 points to 2.0%].

“What I accept is that there is a high level of demand in the New Zealand economy," Robertson said.

"That demand is not currently being met by supply. And those supply chain constraints are largely driven by global factors. There are factors within the domestic economy such as labour supply, which have been an issue. But actually they in turn are driven by the international issues with Covid...

“…Any spending by definition that any government would do has the potential to fuel inflation. What’s important is to make sure that the investments we make are targeted that they achieve the goals that are wider than just the management of inflation."

Asked by one of the Labour MPs about supply chain issues, Robertson said: “Unfortunately supply chain issues appear set to continue for some time.

"One of the biggest issues for New Zealand in recent times has been China’s continuing an elimination approach to Covid, which has meant that the port of Shanghai has been only open one-third of the days this year. And the port of Shanghai is a significant port for both imports and exports for New Zealanders..."

He said the price of containers had come down, but was now being forced up again by the Ukraine conflict. There had been issues around air freight, with the Government subsidising this. The return of passenger flights would help to ease the air freight situation. However...

“The trajectory is that there will be supply chain constraints for the remainder of this year and possiblty into the early part of next year.

"We continue to work actively with the sector to see what we can do, including in areas like product substitution where in the construction sector we’ve been working with the sector to see what alternative building materials we might be able to source because there are constraints on getting those materials into New Zealand.”