The New Zealand economy

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I found reference to this on Zero Hedge but cannot find anything yet in the New Zealand media.

All we have is the “good news” from the IMF report.

N.Z. Budget Deficit Wider Than Forecast After Rail Write Down

New Zealand’s budget deficit was wider than earlier forecast in the fiscal year ended June 30 after a write down in the value of the state-owned rail company offset a rise in tax revenue.

Reuters,

26 April, 2012

The shortfall was NZ$9.24 billion ($7.6 billion) in the year through June, compared with an NZ$8.44 billion estimate in the May budget, according to government financial statements released today in Wellington. The deficit, measured before gains and losses on investments held by state-owned financial institutions, was half the NZ$18.4 billion gap a year earlier.

The figures showed New Zealand’s budget balance improved for the first time since 2006, reflecting a drop in costs associated with earthquakes in and around Christchurch in the past two years. Prime Minister John Key expects to return the budget to surplus by fiscal 2015 by reducing non-essential spending and cutting debt, arguing that tight fiscal discipline will protect the nation’s credit rating and take pressure off the central bank to raise interest rates.

“We’re running a balanced program to build a competitive economy, to reduce the unsustainable growth in government spending of the previous decade and to get back to surplus,” Finance Minister Bill English said in a statement. “In the uncertain global environment, it’s important that the government continues to focus on controlling its spending.”

Today’s statements don’t contain fiscal forecasts or revisions to the bond sales program, which will be published in an update in December.

KiwiRail Assets

The government announced in June that KiwiRail would be restructured and its assets valued on a commercial basis rather than on a public benefit basis. The decision resulted in a NZ$1.4 billion charge in the 2011-12 government accounts.

Excluding the charge, the deficit would have narrowed from the May forecast, the Treasury said.

The deficit included a NZ$1.9 billion cost related to the 2010-11 Christchurch quakes, including the state-owned disaster insurance company, infrastructure repairs and purchases of condemned homes.

Tax revenue rose by NZ$3.5 billion from the year earlier to NZ$55.1 billion, higher than the May projections amid improved company earnings, the Treasury Department said. Other revenue also exceeded forecasts on stronger sales by state-owned businesses and insurance proceeds from Christchurch earthquake claims by government departments.

Core government expenses fell by NZ$1.37 billion to NZ$69.1 billion, less than May projections, reflecting reduced costs in the government’s assistance to owners of weather-affected homes and lower costs of an emissions trading plan.

Net Debt

Net debt rose to 24.8 percent of gross domestic product as of June 30, from 20.3 percent a year earlier and less than the 25 percent projected in May, Treasury said.

Debt is likely to rise to 28.7 percent of GDP at its peak in 2014 and decline to less than 20 percent by the early 2020s, the government said in May.

The government plans to raise at least NZ$5 billion from the sale of shares in four state energy companies and Air New Zealand Ltd. Last month, the government deferred the sale of shares in Mighty River Power Ltd. until early 2013 because of the need to consult with Maori groups who claim rights to the water the company uses to power its turbines.

Share offers for Meridian Energy Ltd. and Genesis Power Ltd. are planned by early 2014.

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The crazy thing about natural disasters or environmental destruction is that it all contributes to a higher GDP. Socially-useful work can count for nothing

IMF's forecast for NZ 'very optimistic' - economist

A leading New Zealand economist says he lacks faith in the International Monetary Fund's forecast that the local economy will grow by more than 3 per cent next year.

NZ Herald,

10 October, 2012

The IMF yesterday released its World Economic Outlook, in which it predicted the New Zealand economy would grow by 2.2 per cent this year and 3.1 per cent in 2013.

Growth in some countries, including New Zealand and Australia, was being boosted by "recovery from natural disasters", the report said.

The IMF's forecast of 3.1 per cent growth was questioned today by New Zealand Institute of Economic Research principal economist Shamubeel Eaqub.

"It's very optimistic and is pretty much based on the Christchurch rebuild."

Eaqub said there was no real evidence to show that rebuild activity after natural disasters gave a significant boost to local economies. Although, the Canterbury rebuild would be "much bigger than usual", he said.

"Forecasts will depend very much on your assumptions for the Christchurch rebuild - how quickly it will happen and how big it will be.

"I don't have a lot of faith that they (the IMF) know what's going on here. They're much better on global stuff."

Westpac Bank senior economist Michael Gordon said he thought the IMF's forecast for New Zealand was, if anything, a little conservative.

"I would say it's on the low side for both years, but to be fair, we tend to be at the upper end.

"We tend to find that the regions they're picking growth to be faster in are where there's leeway for spending, in our case, the stimulus from the rebuilding in Christchurch."

Gordon said the rebuild would likely generate at least $20 billion towards the economy, or 10 per cent of annual GDP.

"No other developed country has faced anything like this for a long, long time," he said.

The IMF listed New Zealand among the 'Advanced Economies', alongside countries like the United States, United Kingdom, Australia and Germany.

It is forecasting the global economy to expand at 3.3 per cent this year and 3.6 per cent in 2013.

That was a revision of its July forecasts of 3.5 per cent in 2012 and 3.9 per cent in 2013.

The downside for New Zealand in having stronger growth than other advanced economies was that our dollar would remain high, putting pressure on exporters, Gordon said.

"By and large we're expecting it to stay fairly close to where it is, at 80 US cents plus.

"Longer term, the hopes of getting the US dollar up and the New Zealand dollar down rests on US growth starting to be a bit more impressive than it's been for the past few years."

The New Zealand Institute of Economic Research yesterday predicted economic growth to slow to 1.5 per cent in the second half of the year from a pace of 2.6 per cent at the end of June.

That came after a more pessimistic outlook in the September quarterly survey of business opinion.

A net 5 per cent of firms were pessimistic about the general business situation, worse than a net 1 per cent in the June quarter, and a net 7 per cent experienced slower trading activity in the period, compared to a flat rate in the prior period.