1. Economic Outlook—Reports Forecasts and WagesTODD MULLER (National—Bay of Plenty) to the Minister of FinanceORAL QUESTIONSQUESTIONS TO MINISTERSEconomic Outlook—Reports Forecasts and Wages1. TODD MULLER (National—Bay of Plenty) to the Minister of Finance: How is the New Zealand economy expected to perform over the medium term?Hon STEVEN JOYCE (Minister of Finance): This week the International Monetary Fund (IMF) released its concluding statement of its article IV review of New Zealand which notes that our economy is undergoing a broad-based economic expansion driven by residential and infrastructure investment migration and the dairy price recovery. The IMF expects this growth to remain strong and above trend into 2018. This positive outlook supports the view from Treasury that economic growth will be around 3.5 percent for each of the next 2 years.Todd Muller: What does the IMF say about the Government's fiscal strategy?Hon STEVEN JOYCE: The IMF considers that the Government's fiscal strategy is broadly appropriate and notes we are already incorporating higher infrastructure spending and new growth-friendly measures at a time when the economy is forecast to be growing above its potential. It also notes that the strong fiscal position provides room for the Government to further accommodate the needs of strong population growth including the higher infrastructure expenditure signalled by the Government in the Budget Policy Statement. It allows the Government to give additional attention to our identified Budget priority areas of supporting low and middle income earners improving public services and reducing the country's debt.Todd Muller: What recommendations did the IMF make for New Zealand?Hon STEVEN JOYCE: The IMF made a range of recommendations some of which we agree with and many of which are already under way. This includes consideration of the introduction of debt-to-income ratio limits further strengthening of the banks' balance sheets measures to increase housing supply and greater trade liberalisation. The IMF also suggested a broad-based capital gains tax but we believe the better approach is targeting housing investors with the 2-year brightline test the discontinuation of depreciation and the resident withholding tax for overseas-based investors.Grant Robertson: Can the Minister confirm that real wages are due to increase by less than 1 percent across the next 3 years?Hon STEVEN JOYCE: My answer to the member would be: According to whom?".Todd Muller: What other reports has he seen on the performance of the economy?Hon STEVEN JOYCE: I think there are many New Zealanders who are interested in the performance of the New Zealand economy. I see that Westpac Banking Corporation recently released its quarterly economic forecast in which it states that "New Zealand finds itself in something of a sweet spot right now." with the economy growing at a steady pace for some time and with a pipeline of building work and also dairy price recoveries expected to drive above average GDP growth for the next few years. It further notes that New Zealand stands out as a strong performer within a difficult global environment.Grant Robertson: Can the Minister confirm that Treasury has forecast that real wages are due to increase by less than 1 percent across the next 3 years and that labour productivity is due to fall again this year making New Zealand's position as the fourth worst performer for labour productivity in the OECD even worse?Hon STEVEN JOYCE: In terms of productivity performances the member knows that is quite a long lagging indicator so it will be some time before we know whether that prediction comes to pass. But in terms of real wage growth yes I am aware of the Treasury predictions but the good news is that real wages have been growing substantially over the last 8 years. In fact wages have been growing at approximately twice the rate of inflation and I have more confidence that that trend will continue than the one being predicted by Treasury in this forecast."