2. Economic Outlook—Reports and ProductivityMELISSA LEE (National) to the Minister of FinanceEconomic Outlook—Reports and Productivity2. MELISSA LEE (National) to the Minister of Finance: What reports has he received on the outlook for New Zealand's economy?Hon STEVEN JOYCE (Minister of Finance): This morning the Reserve Bank released its official cash rate (OCR) decision and the latest Monetary Policy Statement (MPS). The bank's MPS highlights New Zealand's strong growth prospects stating that Annual GDP growth is expected to average 3.4 percent over the next two years". In addition the bank forecasts unemployment to fall to 4.5 percent while wages continue to rise faster than inflation. This picture of steadily improving economic performance is a testament to the hard work of New Zealanders over recent years and the confidence businesses have to grow and expand.Melissa Lee: How does the Reserve Bank's OCR decision today affect homeowners and families?Hon STEVEN JOYCE: By leaving the OCR unchanged at 1.75 percent homeowners' mortgage rates will remain lower for longer. The Government's fiscal constraint and sensible economic management is a key contributor to keeping homeowners' and families' costs under control. I have to say what you would not want to do at this stage of the cycle is impose extra taxes on the economy that increase the cost of their daily essentials like petrol fruit or vegetables. That would have the potential to stall economic growth and push up not only interest rates but also the cost of living.Melissa Lee: How do New Zealand's economic growth prospects stack up against the other developed countries?Hon STEVEN JOYCE: New Zealand continues to have one of the fastest-growing economies in the OECD. The OECD's June economic summary for New Zealand forecasts economic growth of around 3 percent this year because: "A strong recovery in business investment ongoing strength in tourism and the recent increase in dairy prices should support growth." This compares with the expected lower growth rates in the UK of 1.6 percent the US of 2.1 percent and Australia of 2.5 percent. New Zealand's performance of course is no accident; it is all about a strong economic plan that delivers jobs higher wages and lower cost of living increases for New Zealanders.Melissa Lee: What reports has he received on the risk of rising costs of living for New Zealand households?Hon STEVEN JOYCE: As ever the Reserve Bank remains vigilant for the risks of potential inflationary pressures. I have seen a number of reports just in the last day or so that have identified a number of risks that the cost of living could increase quite dramatically with policy change. For example there is one from Horticulture New Zealand which says: "Extra costs on growers of fresh healthy fruit and vegetables will make healthy food more expensive. This seems incongruous with policies around alleviating poverty … ". There is another one from Federated Farmers which worries about a substantial extra tax on electricity food and exports. Of course if these worries came to pass that would push up inflation and of course require the Reserve Bank to push up interest rates to reduce inflation.Grant Robertson: Has he seen reports of the Reserve Bank Governor saying that the most important thing for the New Zealand economy is for our productivity to grow and how has that played out in the last year given that output per hour worked has fallen even by the revised figures of Treasury and Statistics New Zealand?Hon STEVEN JOYCE: The member may not be aware but I think almost any economist would tell him not to look at one year's productivity figures because it is truly a case of—how could we describe it—trainspotting. But in terms of productivity it is a long-term challenge for New Zealand. That is why the Government invests significantly in innovation through business R & D in Callaghan Innovation which has lifted our R & D performance by something like $350 million over the last 2 years—that is $350 million annually—and also by giving businesses the confidence to invest in the sort of equipment that allows them to increase their productivity and not slapping them with ridiculous taxes every 5 minutes as is the practice of the Labour Party."