By Alex Tarrant in Vladivostok
The economic slowdown in China, on the back of the eurozone's woes, could hit the government's 2014/15 surplus track, Prime Minister John Key says.
But the latest advice to the government was it could still hit that target.
Speaking to media at the Asia Pacific Economic Co-operation (APEC) forum in Vladivostok, Russia, Key noted recent comments by Australian Treasurer Wayne Swan that the Chinese slowdown would make it harder for the Australian government to hit its own surplus target.
In New Zealand there was a mixed-picture for the economic outlook, as the slowdown could be mitigated by deteriorating agriculture growing conditions around the world, which would support demand for New Zealand goods and prices.
“I think in terms of the short term, we can’t rule out that China slows down a bit more," Key said on Friday morning (NZ time).
“It’s very Europe dependent. That’s their biggest market; Europe’s slowing more aggressively than had initially been thought at the start of the year," he said.
The slowdown was being reflected in some commodity prices.
"Gas prices are significantly lower, iron ore prices are down, I think, 23-odd percent in the last month or so. So a big shift there," Key said.
There had been quite a substantial write-off of mining stocks in Australia.
In terms of New Zealand it was a “bit of a mixed picture.”
“Because growing conditions aren’t so good around the world, and just with the general increase in demand, you’re seeing dairy prices recovering. That’s a good news part of the story," Key said.
“But in the end, for New Zealand to succeed we need a strong Australia, we need a strong China and Asia, and we need a strong United States and Europe. There are complications there,” he said.
Asked whether it would get harder for the government to meet its 2014/15 surplus target if these trends continued, Key said New Zealand was not immune from global events.
“In the end, the surplus is the difference between two very large numbers, and those numbers, and that tax revenue that will get us back to surplus, is highly dependent on our economy growing, and having the opportunities to grow,” Key said.
“If Asia is weaker than anticipated, that has a direct correlation on New Zealand. You’ve already seen the Australian Treasurer saying their capacity to get back into surplus might be challenged by the slowdown in China," he said.
“So we can’t rule that out. But we’ve always said we’re doing our best to get to surplus, it’s still our advice that we can get there in 20114/15. If the position changes, we’ll come back and communicate that."
“But my very strong preference is for New Zealand to get back to surplus, and to be earning more in the world than we’re spending," Key said
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