Trans Tasman previews next weeks PREFU:
. . . What the PREFU will highlight are Treasury forecasts on economic growth remaining robust, but “normalising” after the dairy boom last season, and on fiscal surpluses thinner than those set out in the budget.
There’s no windfall in revenue as there was in 2005 when the Govt of the day, caught by surprise, scrambled to splash out big spending programmes like Working for Families. The economic situation NZ finds itself in during this cycle is very different. Then credit growth was running at around 10%, compared with 4% now, inflation was high, and consumption was fuelled by rampant debt. This time round, the Reserve Bank Governor Graeme Wheeler jumped in early, and has got the surge in house prices under control. Inflation is subdued, wage growth is only moderate, productivity is rising, households are keeping their spending in check, and corporate balance sheets are in good shape.
So the cycle this time will have a flatter, steadier profile, but growth will be at a sustainable pace, lasting longer. The economy is growing another “leg,” with hi-tech exports rising exponentially. For the Govt, the aim is to keep the economy running on a smooth, upward trajectory. Its eyes are on winning not just this election, but in 2017 as well. For this to be achieved, it has to deliver rising standards of living through the whole cycle. It can’t yet risk another boom-bust, of the kind which has dogged NZ over the last half century, if is to capitalise on the reputation it has sought to nurture of being the most prudent economic managers the country has had in the modern era. . .
The improving outlook for the country has been hard-won and is a result of careful management.
The expected outlook for growth at a sustainable pace and lasting longer is encouraging but it’s not assured.
We know what a National-led government has achieved and can be confident they will continue with the same prudent recipe to ensure that growth is sustainable
A prospect of a weak Labour Party leading a coalition propped up by the Green, New Zealand First and Internet Mana Parties gives no cause for confidence.
Policies announced so far are repeating the failed recipe of the past based on the toxic ingredients of higher taxing, higher spending.