By Alex Tarrant
Prime Minister John Key says the Australian housing market is overcooked, and has again pointed to the idea Australia has a two speed economy as its mining sector outperforms other sectors.
Asked if the Australian budget released last week made him wish he lived across the Tasman, Key replied, "not in the slightest," on TVNZ's Breakfast this morning.
Key's government is set to release its third budget on Thursday this week.
The Australian economy had its fair set of challenges, Key said.
"If you actually have a look, their mining industry is very strong. But once you strip that away, then what you see is retail consumption’s actually quite weak. Their housing market’s a bit overcooked," he said.
The Australian government's budget deficit was also "quite large this year," Key said.
Aussies looking for workers
Retail sales in Australia in nominal terms unexpectedly fell 0.5% in the March quarter month as rising living costs ate in to discretionary spending, JP Morgan economist Helen Kevans said. However the Australian economy had little spare capacity with unemployment sitting just below 5%, and as higher mining company profits flowed through to employment demand.
Australian Treasurer Wayne Swan last week announced a government cash deficit of A$49.4 billion, or 3.6% of GDP, for 2010/11, which was expected to fall to A$22.6 billion in 2011/12 before returning to surplus in 2012/13.
However, Swan and the Australian Treasury have come under fire for their budget forecasts, which include an expectation of corporate tax receipts growing 35% in two years. An increasing tax take, as well as employment growth in Australia, will rely heavily on sustained demand from China for Australian minerals over coming years.
Swan said his budget would lead to the creation of half a million jobs over two years as demand for workers in the Australian mining sector remained strong, and as government seeked to encourage Australians to move into areas of low employment such as infrastructure, transport and government services sectors.
On top of Swan's projection, an Australian labour hire company over the weekend projected the country's resource and energy sector would require an extra 500,000 workers over the next few years, with a mixture of both skilled and low-skilled workers needed.
Flexible New Zealand and Australian labour laws mean citizens of either country can work in the other without a work visa. New Zealanders have been increasingly flocking across the Tasman over the last two years of the current government, after numbers fell from record highs under the previous Labour government when National won the 2008 general election. A net 3,548 New Zealand citizens left New Zealand permanently for Australia in March, according to figures from Statistics New Zealand.
Key last week said his government was aware of the competitive jobs threat from the Australian labour market, but that there were benefits for workers staying in New Zealand. Australia also had a two speed economy as its mining sector outperformed others, Key said.
"We have a much lower top personal [income tax] rate than Australia, we’re starting to invest heavily in our infrastructure, and I think actually as the AFR [Australian Financial Review] pointed out in one of its articles a couple of weeks ago, if you strip mining out from Australia - it’s very much a two speed economy over there," Key said last week at his post-cabinet press conference.
"I think in many respects New Zealand’s doing quite well. That doesn’t mean there’s not a lot more that we need to do,” he said.
Key campaigned before the 2008 election on narrowing the wage gap with Australia and slowing down an exodus of New Zealanders moving to Australia to work. But the government has toned down its comments on narrowing the gap in recent months and disbanded the 2025 taskforce as the wages gap started widening. An average 141 New Zealand citizens a day left to live in Australia in March.
'NZ deficit will evaporate very, very rapidly'
Meanwhile, on RadioLive this morning Key said the budget on Thursday would show the New Zealand government deficit “very, very rapidly” evaporate.
Finance Minister Bill English has previously said the government was aiming for a “meaningful” surplus in 2015/16 after a record expected deficit of up to NZ$17 billion or 8.5% of GDP in the current year.
On Newstalk ZB this morning, Key said the budget would chart a way “where you’ll see New Zealand getting back into surplus,” although would not say when that would be.
“You’ll see the books looking a lot healthier, actually. You’ll see NZ$5.5 billion allocated for Christchurch. You’ll see some changes to KiwiSaver, Working for Families and interest-free student loans, but they’ll all be over time and, dare I say it, reasonably modest, I think in-so-much that I don’t think people need to be frightened," Key said.
"But there will be changes that will save the government money and allow us to have a zero budget and get back into surplus quickly,” he said.
Asked whether that would be quicker than the Treasury forecast, Key replied people would have to wait until Thursday, but added: “That’s certainly been the aim of the government.”
“We’ve gone through a global financial crisis, a couple of massive earthquakes, we’ve had the collapse of the finance companies that Labour signed us up to, we’ve had AMI teetering on the brink. We’ve had a lot of different things in two and a half years, and despite all of those negative claims that the country would have massive unemployment, etc. etc., that hasn’t happened," Key said.
"I think we’ve charted a moderate, balanced, centre pathway through that, taking New Zealanders with us," he said.
(Updates with Australian retail sales comments, Key RadioLive, Newstalk ZB comments, with Aussies looking for workers, corrects Australian retails sales to monthly from quarterly.)
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