Finance Minister Bill English and Treasury will this morning defend their two big economic forecasts from late last year in front of Parliament’s Finance and Expenditure Select Committee.
They will do so against the background of an International Monetary Fund report yesterday giving qualified approval to the country’s economic management.
But at the same time the IMF is repeating its concerns about New Zealand’s low savings rate.
And it says we need to look again at national superannuation.
The Government will reject any suggestion that they did that though the rest of the report will give them some comfort.
But the IMF report released warned that the short term outlook was challenging with both external and domestic risks, the latter arising from rapid house price inflation in Auckland.
“However, New Zealand’s flexible economy is resilient, and medium-term prospects remain positive,” it said.
“New Zealand’s main exports—agricultural consumer products and tourism—should benefit from the ongoing shift to a more consumption-oriented growth model in China.
“Consumer demand in other Asian countries is also expected to grow.”
But the IMF are critical of New Zealand’s low savings rate and directly challenge the Government over its refusal to consider any substantial reform, of national superannuation.
They said that raising national and in particular private saving was critical to reducing external vulnerabilities from the still heavy reliance on offshore funding.
“Higher saving may also reduce capital costs by lowering the risk premium and thereby support productive investment and long-term growth.”
And they said the Government should “to consider comprehensive policy measures to boost long-term financial savings, including through reform of retirement income policies, as this could also help deepen New Zealand’s capital markets and broaden options for retirement planning.”
The IMF does not refer to the TPP in its report but the agreement got plenty of airtime in Parliament yesterday during the annual debate on the prime Minister’s statement.
The Prime Minister –as you would expect him to — in the rough and tumble of Parliament’s debate on his business statement for the year focussed on the divisions within Labour over the TPP rather than defending the Government’s claims for the agreement.
It was left to Labour Leader Andrew Little, to point out that even after 15 years there would still be tariffs on some New Zealand exports into TPP countries and there would still be some quotas.
But issues like this will be able to be debated in front of the Foreign Affairs and defence Committee to which the Agreement has now been referred.
Trade Minister Todd McClay tabled the TPP and the National Interest Analysis in Parliament yesterday and these have now been referred to the Committee.
Committee Chair, Mark Mitchell, expects to be able to announce details of the hearings later this week.
But they will undoubtedly become the focus of the debate over the TPP.
Meanwhile tomorrow’s Finance and Expenditure Committee hearings will not only update treasury’s forecast for the economy but also provide a platform for Opposition MPs to question the Government about some of the provisions in the Half yearly Fiscal and Economic Update such as the increased provision for capital expenditure and the maintenance of the $2.5 billion fiscal surplus available for tax cuts in the 2017 Budget.
