Latest annual review of the New Zealand economy shows the Government’s economic plan will support growth and help close the infrastructure and social deficits
The International Monetary Fund’s (IMF) latest annual review of the New Zealand economy shows the Government’s economic plan will support growth and help close the infrastructure and social deficits that built up in recent years, Finance Minister Grant Robertson says.
“The IMF’s ‘Article IV’ report praises the Coalition Government’s economic plan. It also provides a set of independent forecasts which indicate growth of about 3% a year over the next five years on the back of new, growth-friendly policies,” Grant Robertson said.
“The IMF specifically commented that our research and development tax incentive, the Provincial Growth Fund, our review of the tax system, trade policy and increased infrastructure investment will help the economy become more productive, sustainable and inclusive.
“Other specific policies including KiwiBuild, fees-free post-secondary training and the Review of the Reserve Bank Act also received positive reviews. The IMF said that in the current economic environment, our policy to raise the minimum wage is likely to have minimal negative impact on the economy, but that it will help ease income inequality.
“IMF officials held a range of views on the Government’s policy to place restrictions on overseas buyers of residential housing. The IMF’s Alternative Executive Director for New Zealand, Grant Johnston, wrote that the policy will make some homes more affordable at certain points in the property market cycle, while helping ensure a greater proportion of foreign investment flows into our productive economy instead of into housing speculation.
“The IMF also notes how the Government’s fiscal policy – which includes the $5.5 billion Families Package which took effect from 1 July – will increase potential economic output because of the increased spending it will generate.
“The Budget in May was the first step in our plan to close the infrastructure and social investment deficits which built up in recent years. We note the IMF’s comments that although we boosted infrastructure investment in the Budget compared to the previous Government’s plan, New Zealand might still face infrastructure gaps.
“Since the IMF’s report was finalised, we have announced a record ten-year nationwide transport infrastructure investment through the Government Policy Statement on Land Transport, with a $4 billion spend this year up from $3.6 billion last year and rising to $4.7 billion in ten years’ time.
“We are also continuing our work to develop innovative financing mechanisms for new infrastructure like roads and housing.
“It’s also important to pay attention to the risks to the economy that the IMF has highlighted. These include potential for tighter global financial conditions and New Zealand households’ high debt levels. These show why it is important for the Government to continue running surpluses while paying down public debt so that we are in a position to deal with any rainy day.
“The IMF report shows it is possible for the Government to remain fiscally responsible while creating the room to make record investments in infrastructure and other growth-friendly policies like the R&D incentive, Provincial Growth Fund, KiwiBuild and fees-free education and training,” Grant Robertson said.