1.8b surplus with dairying in doldrums

October 17, 2016

Finance Minister Bill English presented the Crown accounts for the year to June, showing a surplus of $1.8 billion in 2015/16, up from $414 million in 2014/15.

The Crown accounts show core Crown expenses are under 30 per cent of GDP for the first time since 2006, net debt has stabilised to 24.6 per cent of GDP and net worth has grown to $89.4 billion in 2015/16.

Mr English says the $1.8 billion operating balance before gains and losses (OBEGAL) in 2015/16 – which compared to a forecast of $176 million in Budget 2015 – is a significant turnaround on the $18.4 billion deficit in 2011 following the Global Financial Crisis and Canterbury earthquakes.

“Government surpluses are rising and debt is falling as a percentage of GDP which puts us in a position to be able to make some real choices for New Zealanders,” Mr English says.

“The New Zealand economy has made significant progress over the past eight years. This delivers more jobs and higher incomes for New Zealanders, and also drives a greater tax take to help the Government’s books.”

Core Crown tax revenue was $1.6 billion higher than forecast in Budget 2015.

“We’ve also been getting on top of our spending, exercising fiscal restraint while still investing responsibly in our growing economy and public services.

Core Crown expenses were $73.9 billion in 2015/16, below the forecast of $74.5 billion at the beginning of the year.

“We’ve focussed on results and are starting to address the drivers of dysfunction by investing in better public services. We remain committed to maintaining rising operating surpluses and reducing net debt to around 20 per cent of GDP in 2020.

“If there is any further fiscal headroom, we may have the opportunity to reduce debt faster and as we’ve always said, if economic and fiscal conditions allow, we will begin to reduce income taxes.

“The outlook for the economy is positive, the Government’s books are in good shape and we are addressing our toughest social problems. However, we also need to bear in mind that there are a lot of risks globally and that is why it is important to get our debt levels down. 

“Budget 2017 will make positive long-term choices to strengthen the economy and our communities.” . . 

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Eight years ago, outgoing Finance Minister Michael Cullen was forecasting a decade of deficits and that was before the GFC and earthquakes.

This turn around is the result of careful spending with the focus on its quality rather than quantity; and policies which promote growth.

That the surplus was achieved in a year when one of the country’s biggest export earners, dairying, was in the doldrums and the sheep industry was only marginally better makes it even more of an achievement.

 

 


More money where it matters

October 7, 2016

Good news from Statistics NZ:

Median weekly earnings from paid employment rose $44, to reach $924, between the June 2015 and June 2016 quarters, Statistics New Zealand said today. This increase of 5.0 percent was the largest annual increase since the June 2007 quarter. Paid employment includes both wage and salary earners and self-employed people.

“A rise in the proportion of full-time wage and salary earners, and the number of hours being worked, together pushed up median earnings for workers,” labour and income statistics manager Mark Gordon said. Full-time workers (working 30 or more hours) typically have higher weekly and hourly earnings than people in part-time employment.

Workers living in Auckland, Waikato, Gisborne/Hawke’s Bay, and Canterbury received significantly higher median weekly earnings from paid employment than a year ago. In the North Island as a whole, earnings increased 7.0 percent (up to $944 a week), compared with 2.0 percent (to $880 a week) in the South Island.

“While the increase in weekly earnings is similar to that before the 2008 economic downturn, increases in hourly wages were more modest,” Mr Gordon said. “Median hourly earnings from wages and salaries increased 2.9 percent, similar to increases in the past seven years, but well below the 6.1 percent increase 10 years ago.” 

A 2.9% increase when the CPI has increased only .4% still puts a lot more money where it matters – in workers’ pockets.

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NZ 3rd for growth but . . .

September 16, 2016

Good news on the economic front:

The third highest growth rate in the OECD shows the Government’s management of the economy is delivering more jobs and opportunities for New Zealanders, Finance Minister Bill English says.

Statistics New Zealand reported Gross Domestic Product grew by 0.9 per cent in the three months to 30 June 2016. This took annual growth to 3.6 per cent – putting New Zealand’s growth rate in the top three among developed economies.

“Despite the tough period the dairy industry has been through, we are in the unusual position of enjoying solid growth, rising employment and real wages at the same time as very low inflation.

New Zealand’s annual growth rate of 3.6 per cent is more than double the OECD rate of 1.6 per cent and compares with 3.3 per cent in Australia, 2.2 per cent in the United Kingdom, 1.2 per cent in the United States and 0.8 per cent in Japan.

The result means the New Zealand economy is now worth more than $250 billion for the first time.

Growth in the June quarter was led by construction which grew by 5.1 per cent over the quarter. Residential construction was up 10 per cent over the last year – reinforcing the fact that New Zealand is in the middle of a significant building boom.

Exports of goods increased 7.6 per cent for the quarter, the highest increase in 18 years. 

But there is a but:

“While this result is solid and the outlook is relatively positive, there are many risks around and we cannot afford to take our current economic performance for granted. That is why the Government is continuing to focus on building a stronger, more resilient economy.

The Opposition and the other wailers have plenty of other buts including too many people not benefitting from the growth.

You could look at it that way but a growing economy is not a magic bullet.

New Zealand has entrenched problems of dependency which leads to and/or exacerbates poverty with all its attendant problems.

There are myriad causes for that none of which have easy or fast solutions.

But the opportunities to address not just the problems but the root causes of them are greater with a growing economy.

That New Zealand not only has one but has the third fastest in the OECD in spite of the dairy prices in the doldrums, is very good news.

 

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NZ’s ‘eye-popping’ recovery gives choices

September 5, 2016

A leading global economist’s view that New Zealand is showing an “eye-popping” recovery from the events of 2008-09, ought to be making headlines across the country.

Instead the only place I could find it  was in the print edition and on-line archives of the NBR.

“Whenever I come down here it feels like I’m entering a different planet,” Standard & Poor’s global chief economist Paul Sheard told a business breakfast in Auckland this week.

Comparing how different countries have recovered since the global financial crisis, Mr Sheard says New Zealand is a standout.

Measuring real GDP growth for different economies since the pre-global financial crisis peak, Mr Sheard says the US economy has grown 10.7%, the UK has grown 7.7% and the euro area has grown 0.7%.

“There are some big variances in the EU, obviously: Real GDP in Germany is up 6.2%. In Italy – and bear in mind Italy is the third largest economy in Europe – GDP growth is -8.4%. In Greece it is -27%. So that’s a huge dispersion rate.

“But when I looked at New Zealand my eyes nearly popped out – it’s up 32.5%.” Not even Australia has matched that – real GDP there is up 21% over the same period.

New Zealand is also in the position of having relatively low government debt, a budget surplus, and a central bank with room to cut interest rates if there is another downturn and/or offshore shock, he says. Few countries are in that happy position. . . 

Up 32.5%. That is eye-popping even without the earthquakes, droughts, floods and dairy downturn the country has faced in that time.

That growth brings both challenges and opportunities, a point Finance Minister Bill English makes:

. . . New Zealand’s economic prospects are good.

There are a lot of events going on around the world that cause concern on any day of the week. We can’t do much about any of them.

But domestically, a diversifying and strengthening export sector, solid growth in the construction sector and the boom in tourism mean that over the next two or three years the outlook for New Zealand households is positive.

One of the things we are trying to get to grips with is the impact of what – now look to be semi-permanent – low interest rates will be.

I’m not talking about the Reserve Bank Governor’s decisions about interest rates. In my view, far too much time is spent in the financial markets on this very short term focus on what central banks around the world are doing.

More important is the impact of interest rates on the real economy; in households and businesses.

So we should stand back a bit from the noise in the financial markets.

The prospect of longer-term low interest rates is only just starting to bed in.

When we were in Zambia in June, farmers we spoke to were paying interest of 25%. That’s similar to rates we were paying during the height of the ag-sag which makes life and business very, very difficult.

High inflation rates at the same time meant that people investing, even at high rates, were having the real value of their savings eroded.

Now we have the much healthier combination of low interest rates and low inflation.

When governments around the world issue debt over 10 to 15 years at interest rates of zero or below, it shows that at least some people think that interest rates are going to be quite low for quite some time.

The impacts of this in our own economy mean we are having to re-learn the relationships between different variables in the economy.

The first one is connected to housing markets.

One of the things that has encouraged the focus on housing in New Zealand has been that those who’ve gone into the housing market have largely been right when they’ve taken the view that house prices will keep rising.

One of the drivers of demand for housing has been what is now a 25 year track of decreases in interest rates.

Apart from the odd blip in the 2000’s, there has been a fairly consistent reduction in interest rates from 20 per cent down to around four per cent today.

That trend has probably continued for five years longer than we thought.

Following the GFC, it looked like interest rates had bottomed and they’d be up again by now to seven to eight per cent for mortgages. Anyone who has bet on them going down further has bet correctly – people are still making money out of government bonds which are being issued at negative interest rates.

When we look at house prices, supply matters a lot, particularly because of the cyclical effects in the housing market – that is, more flexible supply means prices will be less volatile.

But there’s no doubt that the increase in prices that we’ve seen – particularly in Auckland but, now, increasingly around the country – is driven by the fact that interest rates just keep on dropping.

And that affects all asset classes.

The New Zealand stock exchange, for example, has gone up a lot more than the housing market. And our exchange rate is regularly seen by anyone who analyses it as over-valued.

When Steven Joyce was in Oamaru last week he said we all want two dollars – a low one when we’re selling overseas and a high one when we’re buying.

That is, or course, impossible and no matter how strident the calls to manage our exchange rate, we should not go back there.

The value of the dollar is a reflection on the high regard investors have for our economy and while that does make it harder for exporters, it’s like the weather – something we have to contend with and learn to deal with but can’t influence.

If we expect to see interest rates continue where they are – or go lower – over the next 10 years, we will have to rethink the relationship to asset values. All other things being equal, these asset prices will stay up, if interest rates stay low.     

A simple measure of it is the cost of servicing household debt. While house prices have increased, debt servicing costs have remained remarkably stable over the last 20 years. Although, of course, there will be more risk to households who borrowed a lot at the bottom of the cycle, and could see significant interest rate increases over time from where they are now.

Another effect of low inflation and interest rates is that we are having significant real wage increases without people really noticing.

If you go out on the street and ask people, many will logically point to the nominal increase in their wages – and most of their pay rises are two-three per cent but some are less than that.

But inflation has been remarkably low.

It turns out that even though we have lower nominal wage increases compared to, say, the 15 years up to 2008, real wage increases that are significantly higher than they were pre-GFC.

In the past five years, for example, the average annual wage has gone up 13 per cent while inflation has been just 3.7 per cent.

Wage increases were much higher a few decades but their real value was eroded by inflation so people weren’t better-off. Lower increases coupled with low inflation have given significantly better real wage increases.

It does help explain why we’re not hearing a lot about ‘the cost of living crisis’ – it seems everything that is an issue becomes a ‘crisis’ – but it’s not a crisis. In fact, we’re not even having much of a discussion about it because people can see that prices are not moving up every time they go back to the shop.

Along with this increase in asset values, we’re seeing what are, by historical standards, quite high real wage increases. These moderate but consistent increases we’ve seen over the past five years are relatively unusual in the developed world.

Another effect of low interest rates, and the low inflation that goes with them, is the impact on government and fiscal discipline.

Traditionally we have relied on clearing budget deficits by economic recoveries that have generated five or six per cent inflation and, therefore, significant increases in tax revenues.

That’s not happening now and it means we have to try and beat the political cycle of tight fiscal management when things are tough and loosening up when higher inflation drives stronger increases in revenue.

Currently, you don’t have the increases in revenue to cover large increases in spending.

New Zealand experienced a number of decisive events in 2009/10 in the shape of the recession, earthquake and global financial crisis which forced us to change the way we managed government spending.

Those experiences taught us the need to move away from what has traditionally been a short term, ‘annual cash’ mind set which has had a negative effect on the effectiveness and on the efficiency of our agencies.

These are perpetual monopolies. Government agencies don’t have to worry about what’s going to happen to their revenue – they’re conditioned to the fact it will either stay the same or grow – and if they do a poor job, they’re not going to go out of business.

Agencies should be able to take a 10-15 year view of what they’re doing.

We are gradually trying to push the system to take those longer-term views where they consider their capital assets but, more importantly, their human services. That’s because about 25 per cent of the output that drives the economy is the provision of public services.

It’s my view that in a low inflation environment, a government won’t be able to conduct reasonable fiscal management without understanding much better what drives its costs, what drives its services, and what drives the long term impact that it’s trying to have.

With the use of data analytics, we’re now able to get much better insights into our customers – many of whom are with us in a kind of perpetual sense for 20-30 years. Take, for example, a 23 year old female with mild schizophrenia – she could be on our books for 30 years and will only move off to go onto national Super. We can now use analytics to show the need, to then intervene to change her life, and the trajectories of others like her. 

In the pasts governments have thrown money at social problems.

Government interventions have regularly failed to change lives, in fact, worse than that, they have rewarded failure.

As more people have demanded a service, more money has been thrown at it. The departments grow, the ‘business’ grows. They have effectively been servicing the misery.

Servicing the misery – that’s an indictment of failed policies of the past.

This is the wrong kind of incentive, and we’re trying to change it.

Thus far I’ve outlined three ways in which low interest rates are going to have a long term impact on the economy; higher asset values are becoming the norm, New Zealanders are getting real wage increases, and the government is changing its approach to the way it manages its books.

This will have an impact on an election.

The traditional model in a recovered economy is for parties to out-bid each other for showing how much they ‘care’ by using hundreds of millions of dollars of your money on projects or programmes that they have no idea will work or not.

However, we’re trying to reframe that debate away from how much is spent to how much of an impact can be made – and to show a willingness to be accountable for that impact.

A final point around low interest rates is that we shouldn’t let the discussion around central bank rate setting and deflationary risk leave the impression that low interest rates are somehow an inherently bad thing. Deflation certainly is. That’s why central banks around the world are creating the most unimaginable monetary policy that you won’t find in any text book – although, I hope you would now.

For most businesses and households, stable low interest rates are positive, not negative. Households are encouraged by that stability. The question is whether the worry that eventually those rates turn around will mean people hold off from investing and risk-taking to keep growth momentum going.

A little inflation is good for an economy because it encourages investment. Deflation discourages investment. People stop spending knowing whatever they want to buy will be cheaper in the future.

The Government, in the meantime, will focus our economic programme on some of the old fashioned stuff; micro-economic reform.

That includes the regulation of the housing market in New Zealand – it’s been shockingly economically ignorant – and the planning system needs to start understanding the impact of the decisions it makes on households, on costs and on the economy – not just on amenity value.

Another area we’re spending a lot of time on is the balance of environmental quality and economic growth, both through climate change and fresh water quality. Because we are a resource-based economy with an environmentally-based brand, getting these things wrong could cost us a lot of growth opportunity. Getting it right, though, could give us some real dynamism through the next ten years. 

We need environmental quality and economic growth, and with care and good science we can have both.

My final point is this; one of the unique opportunities we have in New Zealand is that we have choices. Most other developed economies are faced with a toxic mix of problems; aging populations, very high public debt levels, and low growth. Because of those factors, there are growing questions about their political institutions.

We, along with Australia, are very fortunate to be among a handful of countries where we have relatively low levels of public debt.

In New Zealand’s case we actually have budget surpluses – which only half a dozen other countries have. We have populations that are aging but not as fast as other countries – and are more open to immigration.

Therefore, we can make active choices about where to invest in more growth and about what we think about inequality and inequity in our country.

That is going to become more and more unique to New Zealand and Australia – and we look forward to being a part of that opportunity. 

 In a debate before the 2008 election Helen Clark and John Key were asked what it meant to be wealthy.

She gave a defensive answer which, from memory, included something about money not being important to her.

He said it gave you choices.

He’s right it does, whether you’re an individual, an organisation or a country.

There are both challenges and opportunities in growth but the government has got its books back into surplus and that gives it choices.


The case for irrigation

June 3, 2016

Peter Graham puts the case for irrigation:

Irrigation is not just a question of economic stimulation, increased farm incomes, more jobs, growth of our cities, and creation of wealth (so we can afford to clean up our already degraded rivers and streams). The reason is far simpler. 

Just consider:

  • World food production will need to double in the next 50 years to meet demand.
  • 20% of world’s agricultural land is irrigated to produce 40% of world’s food.
  • By 2030 world fresh water demand will exceed supply by 40%.
  • By 2030 more than 3.5 billion people will live in areas affected by acute water scarcity.
  • Temperature increases and changes in climate patterns are predicted to severely reduce world grain and rice production. 

The world needs more food. New Zealand is blessed by ample rain so water storage, irrigation and land-use intensification is essential. . . 

Irrigation is not just about more and better options for farmers. It’s about producing more food for New Zealand and the world.

But there are barriers:

Water storage is a big-ticket item. The smallest project comes in at around $70 million and larger more than $300 million, excluding on farm costs. Investigating proposal feasibility and proving viability is also costly. Practically, it is hard for the irrigators to fund them and service the debt without outside assistance and/or major increases in food prices. 

Government funding for feasibility studies and funding of schemes as a minority short-term investor is  not sufficient. Obtaining private sector funding and keeping operating costs at an economic level for farmers is also proving difficult on large-scale proposals. 

Expecting local government to be the majority funder in such high cost infrastructure is unrealistic. It is hard to see how infrastructure on this scale can be funded without major government capital investment.   

Food is essential to a stable functioning society and we must look at irrigation as essential public infrastructure. We must consider its benefits in terms of regional development and food production, urban water supply and recreation use, not simply in terms of economics and income generation.  . . 

Irrigation is infrastructure which provides benefits and opportunities for individuals, businesses and communities in the same way for example roads do.

Only central government is in a position to fund projects on the basis of a far longer return on investment period than the private sector. Only government is in a position to target funding at environmental flow and environmental rehabilitation requirements and plan for infrastructure requirements of this scale on a long-term basis. 

If the increasing demand for electricity had not been met by massive post war hydroelectric dam construction, New Zealand would be a very different place. If government hadn’t built infrastructure, New Zealand simply could not have supported post war population growth and the baby boom. The reality is that in New Zealand, very large infrastructure projects require greater government input than is presently available for irrigation projects. 

The regions and rural New Zealand need revitalisation. Environmental rehabilitation of rivers and wetlands and environmental protection of riparian margins needs to be paid for. Public Private Partnerships or suspensory loans, with repayment remitted on meeting of clear targets for job generation, increase of summer river flows, improvements to urban water supply, improvement of water quality and riparian and watershed protection, may be effective in ensuring irrigation schemes are not only economically viable, but that they also deliver wider community and environmental benefits.  

Past mistakes with intensification of farming without farm environment plans have contributed to water degradation. We’ve all learned from that . New water plans and the requirement for farm environment plans will ensure new schemes don’t degrade water quality.

Water storage schemes go further in providing the ability to improve water quality, by for example maintaining minimum flows during droughts.

Waiareka Creek was a series of semi-stagnant ponds before North Otago Irrigation Scheme maintained minimum flows, improving the quality of the water and water life.

Years can be spent going through a resource consent process for a major project at significant cost. As councils develop land and water plans that give clear directions as to how water is to be managed it is becoming easier to determine what is required to make a proposal compliant or able to be consented. Generally, it’s the time and cost of appeals that have been the major issues with the consenting process for irrigation projects. 

The interface between the RMA process and disparate central government processes for the use of the Crown estate needs to be addressed urgently. It is not reasonable to have a project that has gone through a long, intensive and expensive consenting process effectively re-litigated in the context of subsequent objections to use of Crown land or parts of the conservation estate. 

Classes and categories of conservation land need to be clearly established and realistic protection criteria clearly set out. The ability to obtain consent in conjunction with the RMA consent applications being dealt with is essential. This shouldn’t be controversial. 

The rules need to be clear so complying with them is easy and gaining consent less expensive in terms of both time and money.

Our environment and river systems are already highly modified and in many areas degraded.    

We need to deal with future land-use in the context that people will continue to live and work in the environment.  Most of our issues are legacy issues and will cost money to fix.  We need to set realistic standards that invite compliance. 

Most water quality problems now are legacy issues. There is a nitrogen bloom in a river near Nelson caused by a pig farm which closed down 30 years ago.

The requirement for independently audited environmental farm plans and the necessity to comply with council water plans will protect water in the future. Existing problems caused by poor practices in the past must be addressed but that will be expensive and must not be used as an excuse to block new irrigation schemes.

Controls on groundwater discharges and leaching of nitrogen and phosphorus are essential and must be treated sensibly. It is important to determine what a healthy standard is for each river system and what is needed to achieve and maintain it.   

Individual farm environmental plans and detailed records of water use, fertiliser application, and stocking rates is simply part of living in today’s environment, as is development of wetlands and fencing of riparian boundaries.  

However, regulating these plans and records must be achievable and effective. It is one thing to require detailed monitoring and reporting when the output has a real effect on water quality. It quite different to require the same level of on-farm monitoring and reporting when the level of discharges can be monitored and controlled simply by monitoring water quality in the river. 

We need to start looking at water storage and land use intensification as part of the solution and manage the environmental issues appropriately. It’s as simple as that. 

Water storage and land use intensification can with the right rules improve water quality and will contribute to rates and taxes needed to deal with legacy issues.

Irrigation provides opportunities for farmers who choose to make the big investment required on-farm and in the off-farm infrastructure.

But the benefits go far beyond the farm gate:

I live in Napier and I want to see Hawke’s Bay grow and prosper. I want my kids and their friends and my grandkids and their friends to have a future here.

I want to see the Tukituki have strong environmental flows in the summer. I want to see all farms having individual environmental management plans and effective nutrient discharge limits and controls. 

I want to see water managed properly with existing degraded rivers and land areas restored by riparian plantings, development of wetlands and sensible management of areas with high landscape and environmental values. 

I can also live with the inundation of riverbeds and small areas of the DOC estate when the Conservation values of that area are already well represented, or where appropriate mitigation offsets or vesting of land in exchange can be achieved. Everything has its pros and cons but you have to look the big picture and what really matters.   

So, it’s simple really:

  • Councils, who haven’t already done it, need to get their act together with the land and water management requirements in their plans and appropriate discharge and reporting limits.
  • Rules for use of the Crown estate need to be better co-ordinated with RMA consent requirements.
  • Better mechanisms for increased public finding of schemes focussed on clear targets for regional and environmental benefits, as well as increased food production need to be developed, or food costs will skyrocket.

The world needs more of the high quality food New Zealand can produce if more of the water that flows out to see is used for irrigation.

That requires better, clearer rules to reduce the cost of the consent process.

It also needs more public investment in the infrastructure, recognising that the environmental, economic and social returns are widespread and long term.

P.S. The link at the top is to Politik, where you will find the best-reasoned and researched, non-partisan political comment in New Zealand.

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Before the Budget

May 26, 2016

Finance Minister Bill English will deliver his eighth Budget this afternoon.

Before it’s delivered, Prime Minister John Key offers some briefing notes:

1. More than 200,000 jobs have been created over the past three years – that equates to around 180 new jobs every day.

2. New Zealand has the third highest employment rate in the developed world.

3. We’re on track for annual economic growth of about 3 per cent for the next few years.

4. We’re also on track for rising surpluses and falling debt – we were one of the first developed countries to be back in surplus after the global financial crisis when we posted a surplus of $414 million last year.

5. Budget 2016 will contain $1.6 billion in new spending. We’ve already announced funding for more lifesaving drugs, emergency housing, and to support our thriving tourism sector.

This year’s Budget will further advance our work to support a strong, growing economy. It’s only through a strong, growing economy that we’re able to create more jobs, lift wages and deliver better public services to those who need them most.

Labour’s last Budget in 2008 was forecasting a decade of deficits.

In spite of the GFC, Canterbury earthquakes and other unforeseen hurdles, the government books were back in surplus last year and, with continued careful management, are expected to stay there.

This isn’t about a surplus for surplus’s sake. It’s the only way to sustainably fund public services, reduce debt, look after those who need help and leave us all with more of our own money.


Inflation is theft

April 18, 2016

Low inflation is boosting household spending power:

Low inflation is helping New Zealand households get ahead, with wages on average continuing to rise faster than the cost of living, Finance Minister Bill English says.

Inflation was only 0.4 per cent for the year to March 2016, according to figures released by Statistics New Zealand today. Inflation for the March quarter was 0.2 per cent. 

Much of quarterly increase was driven by cigarettes and tobacco, which rose 9.4 per cent following increase in excise duty in January. Food prices were up 1.2 per cent in the quarter, but were down 0.4 per cent over the whole year.

Lower oil prices contributed to the low cost of living increase. Petrol prices fell 7.7 per cent in the first three months of 2016, following a 5.7 per cent fall the previous quarter.

“We are in the unusual situation of having solid economic growth, more jobs and rising wages at the same time as very low interest rates and inflation,” Mr English says. “This is helping New Zealand families get ahead.

“Households with mortgages have the double benefit of low cost of living rises and lower mortgage servicing costs, which will be particularly welcome in regions with increasing house prices.

“Since the start of 2012 the average annual wage has increased by more than 10 per cent to $57,800, considerably faster than inflation which has been only 3.1 per cent.”

An additional 175,000 jobs have been created over the last three years, with a further 173,000 expected by 2020.

“Overall, New Zealand is doing well and New Zealanders are reaping the benefit of a growing economy.”

When Don Brash was governor of the Reserve Bank he called inflation theft and it is, eroding the real value of money and investments.

Now, wage-rises outpacing inflation combined with low interest rates are giving households more spending power.

When people seek government help it usually requires more spending.

The government’s concentration on keeping a tight rein on its finances doesn’t usually get much credit but it is one way it can influence inflation and in doing so it protects and enhances the value of what people earn, invest and save.


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