Heir apparent in good books
Finance Minister (and prime minister heir apparent) Bill English has received a gold star for what might be his last set of financial accounts.
‘‘Kiwi fiscal books shine again,’’ was the headline TD Securities strategist Annette Beacher chose for her summary of the Treasury’s Half-year Economic and Fiscal Update (HYEFU) released yesterday.
It painted a healthy economic picture with rising wages, strong growth and growing surpluses due to a booming construction sector, strong tourist numbers, a growing population, and low interest rates.
English said economic growth was expected to average about 3 per cent over the next five years – ‘‘considerably stronger than forecast’’ in May’s Budget.
Unemployment was forecast to drop to 4.3 per cent by 2020-21. The average wage was expected to increase to $66,000, an increase of $7500.
‘‘Even if there are pre-election sweeteners slipped into the books next year, that is unlikely to dent what is clearly a strong Government balance sheet,’’ Beacher said.
National’s commitment to lowering debt remained in place and the slightly restrictive budget outlined in the HYEFU was neutral for the Reserve Bank, which in turn had a neutral stance on interest rates at present, she said.
ASB economist Nathan Penny said the stronger economy gave the Government more choice.
‘‘A clear winner for the added revenue will be infrastructure spending, with the Government planning additional capital spending of $5.4 billion over the next four years,’’ he said.
Tax cuts remain an option, Penny said, but were downplayed in the HYEFU.
‘‘All in all [yesterday’s] HYEFU was fairly upbeat and will be taken well by the market, as one would expect given the underlying strength of the economy,’’ ANZ rates strategist David Croy said. ’’It showed stronger growth forecasts, slightly higher surpluses, lower net debt, and acknowledged the impact of the Kaikoura earthquake.’’
Earlier on Thursday, Reserve Bank governor Graeme Wheeler gave a speech in Greymouth where he told the Development West Coast Conference that, in the absence of major unanticipated shocks, prospects looked good for continued strong growth over the next 18 months, driven by construction spending, continued migration, tourist flows, and accommodative monetary policy.
He noted that 2017 held the prospect of ‘‘considerable political and economic uncertainties’’.
‘‘The main domestic risk is a significant correction in the housing market.’’
"The main domestic risk is a significant correction in the housing market." Graeme Wheeler Reserve Bank governor