1. AMY ADAMS (National—Selwyn) to the Minister of Finance: How does the outlook for the economy compare with forecasts provided in Budget 2009?

Hon BILL ENGLISH (Minister of Finance) : Today I released a half-year update, which includes a new set of forecasts that update the Budget forecast. They show that the New Zealand economy did not shrink as much as anticipated in the Budget, and that growth rates over the next 2 or 3 years are a little better than forecast in the Budget.

Amy Adams: How are these small improvements in the outlook showing through in the economy?

Hon BILL ENGLISH: The most significant improvement is in the outlook for employment. The forecasts say that the unemployment rate will peak in the early part of next year at 7 percent, compared with Budget forecasts of an 8 percent unemployment rate peaking in the second half of 2010. The forecasts also show that the economy has lost fewer jobs than was anticipated in the Budget by a figure of around 80,000.

Hon David Cunliffe: With the Reserve Bank forecasting GDP growth of 3 percent in 2010 and 4 percent in 2011, why is his party describing the improvements as “small”, and why is he telling New Zealanders that this recovery is shallow?

Hon BILL ENGLISH: Because that is the case. The New Zealand economy still has some significant imbalances that need to be worked out, and the higher exchange rate is making that a bit more difficult. The pick-up in the economic outlook will lead to some improvement in the Government’s books, but that is several years away. For instance, we thought we would reach surpluses in 10 years; that has now been brought back to about 6 or 7 years.

Hon David Cunliffe: Will he at least concede that Treasury’s forecasts of stronger economic growth and a lower deficit, as they are still significant, give him more flexibility, therefore, in drawing up Budget 2010; if not, why not?

Hon BILL ENGLISH: No, I do not think it gives the Government much more flexibility. At the moment we are borrowing $250 million per week, on average, every week for the next 4 years. The forecasts will drop that borrowing to $240 million per week every week for the next 4 years, so it is some improvement, but not yet significant enough.

Amy Adams: What particular economic and fiscal challenges does the Government have, heading into 2010?

Hon BILL ENGLISH: The main challenge for the Government’s books is simply to stick to the plan that was outlined in the 2009 Budget. The Government is trying to arrest the rapid growth in Government expenditure, and to make sure that every dollar we take off taxpayers each week is used effectively.

Hon David Cunliffe: Why is the Minister sticking to the plan of the 2009 Budget, when today’s announcements show a significantly different and improved fiscal outlook that would enable all New Zealanders to benefit more significantly in the recovery? Is it a case of a breath of relief for Mr English and Mr Key, and crumbs for ordinary Kiwis?

Hon BILL ENGLISH: We are sticking to the plan because it is a far-sighted and thorough plan.