Finance minister sees bright side | Stuff.co.nz

MARTA STEEMAN

JOHN KIRK-ANDERSON/The Press

GOOD SIGNS: Finance Minister Bill English said the high Australian dollar was helping New Zealand manufacturers sell products there.

Canterbury farmers were having a top year and for local manufacturers exporting to Australia "things have never been better", Finance Minister Bill English told a Christchurch business audience.

In the quake-stricken city yesterday for a post-Budget business lunch, the finance minister emphasised the positive elements of Canterbury's situation, saying he had recently visited the region and found "the Canterbury Plains are having the best year they can remember".

The autumn had been "fantastic" and prices were "incredibly consistent".

The strength of the Australian dollar was making New Zealand manufactured products a lot more competitive, he said. The New Zealand dollar is at present worth about A74c and manufacturing forms about 15 per cent of Canterbury region gross domestic product.

"If you are a manufacturer selling to Australia, which is our biggest market, things have never been better," English said.

The country had been enjoying the highest export prices seen in a generation.

Treasury has estimated the damage from the two earthquakes is around $15 billion, about 8 per cent of GDP, and direct costs to the Crown will be $8.8b.

Canterbury Employers' Chamber of Commerce chief executive Peter Townsend reckons the bill to rebuild will be around $30b.

Yesterday English was saying it would cost $15b-$20b to rebuild Christchurch. He said the Government could not find another national disaster in a developed nation where the economic impact was greater relative to the country's GDP.

The estimate of $15b is about 8 per cent of GDP whereas the Japanese earthquake and tsunami are estimated to cost that nation between 3 per cent and 5 per cent of GDP.

English said Budget 2011 was part of the Government's programme, started with Budget 2009, to rebalance the New Zealand economy so that growth in the future came from export earnings and not from excessive consumption and property speculation.

The New Zealand economy was "a carriage of the China-Australia train" both growing economies providing huge opportunities for New Zealand.

He had been in China recently and they had expressed a wish to see New Zealand's $10 billion of exports to China double to $20b in the next five years. The only constraint was our ability to take advantage of that.

Some commentators had said Treasury's growth forecasts were too optimistic but they were in the "middle of the pack" of economists' forecasts, he said. Treasury is forecasting growth of 4 per cent in the year to March 2013, the highest point of growth in the five years to March 2015.

English said New Zealanders were moving into a more confident frame of mind, albeit carefully.

He said Christchurch businesses had been much more resilient than expected.

Last year's Budget focused on the largest tax reforms in 25 years and this Budget was focused on cutting Government debt, moving towards a Government operating surplus and rebuilding Christchurch.

The moves to cut Government spending meant the Government would borrow about $10b less than it would have.Because borrowing conditions had been favourable, the Government had been borrowing on average $380m a week and sometimes $1b a week but next year that would fall to an average of $100m a week for the next three years.

To criticisms that the Government should have done more than just tighten the eligibility of interest-free student loans, English said the move was in line with community consensus.

The Government's aim to keep its debt below 30 per cent of GDP "keeps us largely off the radar". When government debt exceeded 60 per cent of GDP, the country was considered to be in trouble unless the economies were the United States and Britain who were "able to get away with it".

A small country like New Zealand with government debt of 30 per cent to 60 per cent of GDP would find it expensive to borrow overseas.

- The Press

Source: http://www.stuff.co.nz/business/farming/5034994/Finance-minister-sees-bright-side

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