Wilkinson Kate: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeWilkinson Kate: Questions for Oral Answer — Questions to Ministers[Sitting date: 17 September 2013. Volume:693;Page:13371. Text is incorporated into the Bound Volume.]3.Hon KATE WILKINSON (National—Waimakariri) to theMinister of Finance: What recent reports has he received about the outlook for the New Zealand economy?Hon STEVEN JOYCE (Acting Minister of Finance): The Reserve Bank last week issued its Monetary Policy Statement for September. In that statement the Reserve Bank Governor confirmed that the official cash rate was unchanged at 2.5 percent. He noted that inflation remains subdued with the consumer price index increasing by just 0.7 percent in the year to June. However inflation is expected to rise gradually towards the midpoint of the Reserve Bank’s 1 to 3 percent target band as economic growth strengthens over the coming year.Hon Kate Wilkinson: What did the Reserve Bank say about the expected growth of the New Zealand economy?Hon STEVEN JOYCE: The Reserve Bank said that the strengthening of the New Zealand economy that occurred from late 2012 has continued through the first half of 2013. The economy is estimated to have grown 3 percent in the year to the September quarter. However I would note that the effect of the severe drought earlier this year is likely to show up in the GDP figure for the June quarter which is due out this Thursday. For example Treasury is in fact expecting a decline in GDP of 0.2 percent for the June quarter. Despite that the gradual underlying recovery continues and the Reserve Bank is expecting annual GDP growth to increase to about 3.5 percent by the middle of 2014.Hon Kate Wilkinson: How does the New Zealand economy’s expected performance over the next few years compare with forecasts for other developed economies and what global issues are expected to come into play?Hon STEVEN JOYCE: As the Reserve Bank Governor said in a speech last month New Zealand is now one of the world’s fastest-growing developed economies. The growth is expected to remain strong and become more broad-based over the next 2 years. However the governor has also noted a number of global risks that could affect New Zealand. For example speculation about future Federal Reserve policy has put substantial downward pressure on emerging market currencies and in addition recent unrest in Syria has seen oil prices move higher. The Reserve Bank says that it is of some concern that potential exchange rate depreciation and higher oil prices could cause deterioration in the economies of New Zealand’s Asian trading partners.Hon Kate Wilkinson: What did the Reserve Bank say in its latest Monetary Policy Statement about new restrictions on high loan-to-value ratio mortgage lending and what impact are these measures expected to have on the housing market?Hon STEVEN JOYCE: The Reserve Bank noted that it expects the new loan-to-value ratio speed limits which come into force on 1 October to contribute to a fall in demand for housing. It will lead to lower house price inflation than would have otherwise been the case. The Reserve Bank estimates that loan-to-value ratio speed limits are likely to reduce annual house price inflation by about 1 to 4 percentage points over the next year. In addition it estimates the new loan-to-value ratio rules are likely to lower household credit growth by 1 to 3 percentage points over the next year. This lower house price inflation is projected to dampen household consumption expenditure over the coming year or so and reduce the expected 90-day interest rate by about 30 basis points.