New Zealand should expect strong and increasingly broad-based economic growth, according to the International Monetary Fund’s latest report on New Zealand, published today.
The IMF is forecasting annual economic growth in New Zealand to peak at 3.5 per cent next year and not fall below 2.5 per cent over the next few years. This growth will be driven by strong construction activity, higher prices for exports and increases in net migration.
“This is the latest in a series of encouraging reports on the New Zealand economy, which confirms that we are well placed compared with most other developed countries,” Mr English says.
“The IMF highlights the importance of getting the Government’s books back to surplus to help the Reserve Bank keep interest rates lower for longer. Under the previous government, excessive spending, alongside the booming housing market, contributed to floating mortgage interest rates reaching almost 11 per cent.
“A range of indicators points to broad-based growth in the economy. Building consents in March were nearly double the number issued three years ago. Business confidence remains near 20-year highs. And employment figures showed 84,000 more jobs in the year to March - the largest annual increase in employment since 2004.
“Sticking to our responsible economic management will help ensure Budget forecasts for strong economic growth, average wage increases of $7,600 by 2018, and unemployment falling to 4.4 per cent, all occur.”
The IMF is expecting New Zealand’s current account deficit to increase to around 6 per cent of GDP by 2016 – still well below the levels seen in the mid-2000s.
“Although this longstanding imbalance remains a vulnerability, the latest figures are encouraging with Statistics New Zealand showing the current account deficit at 3.4 per cent of GDP,” Mr English says.
“Getting on top of Government spending to keep interest rates down and promote broad-based economic growth is a key plank of that improvement.
“Overall, the IMF report confirms the Government’s economic programme is taking New Zealand’s economy in the right direction,” Mr English says.
“This is the best way to support jobs and raise New Zealanders’ living standards.”
The IMF report is available at http://www.imf.org/external/pubs/cat/longres.aspx?sk=41620.0