Hayes John: Questions for Oral Answer — Questions to Ministers 
Text is incorporated into the Bound Volume 
Hayes John: Questions for Oral Answer — Questions to Ministers 
[Sitting date: 01 August 2012. Volume:682;Page:4149. Text is incorporated into the Bound Volume.] 
3. 
JOHN HAYES (National—Wairarapa) 
 to the  
Minister of Finance 
: What reports has he received on the international economic situation and its impact on New Zealand? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 There are a number of reports on recent developments in Europe and they are somewhat sobering. Spain and Italy continue to struggle. Spain is the eurozone’s fourth-biggest economy and the world’s twelfth-biggest economy. A bailout of Spain would probably cost double that of Greece Ireland and Portugal combined. There is also come concern about Italy. The Italian economy is twice the size of the Spanish economy and is among the top seven economies in the world. The outlook for the one bailout that has been attempted in Greece is somewhat sobering in that Greece is behind on its reform timetable and discussions are now focusing on some last-chance options to keep Greece in the eurozone. Any significant change in the situation of these economies could have an impact on New Zealand. 
John Hayes 
: Given the ongoing uncertainty in Europe what is the outlook for the New Zealand economy? 
Hon BILL ENGLISH 
: I think we are all adjusting to the ongoing uncertainty in Europe because it could last for some years. The New Zealand economy is continuing to grow moderately. One impact of these events in Europe is that yields on New Zealand 10-year Government bonds have now fallen to 3.2 percent—the lowest interest rate we have ever paid for 10-year money. This rate reflects New Zealand’s status as a highly rated stable economy with a prudent fiscal strategy. 
John Hayes 
: Why is New Zealand considered to have a relatively strong outlook? 
Hon BILL ENGLISH 
: I think the important word there is “relatively” strong. By the standards of say 10 years ago our outlook is pretty moderate. By today’s standards it is relatively strong. That is simply because other economies such as Europe the US and Japan are growing significantly more slowly than New Zealand’s and our own growth rate is broadly in line with Australia’s. The relative strength of our economy is allowing New Zealand households to reduce their debt in a moderate and considered manner without the significant cuts in standards of living in incomes or in Government assistance that are increasingly applying across most developed countries. 
John Hayes 
: What do recent interest rates and inflation data tell us about New Zealand and the world economy? 
Hon BILL ENGLISH 
: Our current inflation rate is around 1 percent and as I indicated earlier our interest rates are at historic lows. On the one hand it is giving New Zealand households a bit of room to reduce debt as well as pay the interest on it and that is good news; on the other hand those low rates here and around the world are indicators that the outlook for the global economy is not that good. I would notice that there is a growing divergence in interest rates between those economies that are stressed such as Spain and Italy and those economies that are seen as safe havens such as Germany where people are now paying the central bank to hold their money—that is negative interest rates.