Clark David: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeClark David: Oral Questions — Questions to Ministers[Sitting date: 04 November 2014. Volume:701;Page:481. Text is incorporated into the Bound Volume.]5.Dr DAVID CLARK (Labour—Dunedin North)to the Minister of Finance: Based on Treasury’s PREFU forecasts how much faster will exports have to grow relative to the rest of the economy from the March 2016 year to 2025 to achieve the Government’s 40 percent export target?Hon BILL ENGLISH (Minister of Finance):If the member does not mind I will just explain the basis of the numbers so that we do not have endless questioning on this using different numbers. The target the Government set is for real exports of goods and services as a percentage of real GDP. On that basis Statistics New Zealand reports that the real exports of goods and services have increased from 31.9 percent of the real economy in 2009 to 33.3 percent in 2013 despite the headwinds of a recession the global financial crisis and the high dollar. The member of course uses the nominal value of exports of goods and services which includes for instance increases and decreases in the prices of them. We do not think that it is an adequate measure of the degree of export intensification in the economy. The Business Growth Agenda update earlier this year said that the ambitious 40 percent target will not be easy. It will require New Zealand to roughly double total exports by 2025. In terms of the question real exports would have to grow by just over twice the rate of the real economy to reach the Government’s export target of 40 percent of GDP.Dr David Clark: Is the fact that exports have fallen from close to 33 percent as a proportion of the economy when he took office to now under 30 percent a sign of the success or failure of his goal of rebalancing the economy towards exports?Hon BILL ENGLISH: My having indulged the member with an explanation of the basis of the target he then proceeded to completely ignore the explanation. The target is real exports of goods and services as a percentage of real GDP. In the most common terms it is the volume of goods and services as a proportion of the volume of the economy. The member is using the nominal measure and the nominal measure includes changes in price. So for instance the drop in the dairy prices would mean a drop under his calculations in exports as a proportion of the economy. We do not think that is the best measure. It is a measure but it is not the best measure. So I simply disagree with the member’s assertion. Whatever numbers he is using are not related to our target.Dr David Clark: Is the fact that even with terms of trade at a 40-year high the OECD says we will have the second worst current account deficit in the developed world this year and the IMF says we will have the worst a sign of the success or failure of his goal of rebalancing the economy?Hon BILL ENGLISH: The member should be a bit careful about asking that question because at the peak of the last economic cycle under the previous Government the current account deficit was minus 8 percent of GDP—minus 8 percent—and I think currently it is at less than half of that. So yes that is some success.Dr David Clark: Does he really think his aim of rebalancing the economy is achievable given that even with New Zealand’s terms of trade at their highest in a generation because of the good fortune of historically high dairy prices under his own economic settings we still have a current account deficit and exports as a proportion of the economy are declining?Hon BILL ENGLISH: I simply disagree with the member’s assertion that exports are declining. The price of some of them has declined—there is no doubt about that—but the measure of the real volume as a proportion of the total volume of the economy has grown. I mean this is one difference between the Government and the Opposition. We believe New Zealand exporters have done very well over the last 4 or 5 years despite difficult circumstances; the Opposition thinks they are hopeless. Well most of them I think supported this Government in the election and back our policy mix which is encouraging them to become more competitive and the numbers I have quoted show some progress but certainly not enough. The target is 2025 and we believe that if we continue to pick up the pace under sensible policies the export sector may be able to get there.Dr David Clark: Why does he think getting further and further away from his own target is a sign of success?Hon BILL ENGLISH: We are not getting further and further away from our own target. We are getting a bit closer despite the fact that circumstances have been pretty difficult. And if you are looking at the rate of progress over the next 4 or 5 years as the high level of construction runs through and in Christchurch and Auckland we catch up then there will be more resources—for instance more people available to go to the export sector. So I would expect some progress over the next few years and then a faster rate of progress from about 2018-19 onwards.