Bennett David: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeBennett David: Oral Questions — Questions to Ministers[Sitting date: 13 August 2015. Volume:707;Page:5791. Text is incorporated into the Bound Volume.]2.DAVID BENNETT (National—Hamilton East) to the Minister of Finance: What reports has he received on the resilience of the New Zealand economy?Hon BILL ENGLISH (Minister of Finance): I have seen a recent report from Fitch Ratings—one of the three ratings agencies—which says that the New Zealand “economy and banking sector are relatively well positioned to weather a cyclical downturn in the dairy market”. Fitch Ratings does not expect lower milk prices in the short term to affect the ratings of the New Zealand Crown or the major banks. Although the dairy downturn is of concern there is a reasonably significant headwind to the economy. The Fitch report suggests that the New Zealand economy is well positioned to manage supporting a broadly positive medium-term outlook. It says there are risks for the economy in bank balance sheets should the dairy market downturn persist through to 2016. However the consensus expectations that it refers to are for milk prices to find a floor and recover later in this season.David Bennett: What does Fitch Ratings say are the potential consequences of the dairy price fall for the New Zealand banking sector?Hon BILL ENGLISH: Fitch Ratings says New Zealand banks are in a relatively healthy position and should be able to manage this decline without an impact on their credit rating. It says that since 2008-09 banks have underwritten better-quality business. Their exposures are well covered by collateral exposures above 70 percent loan-to-value ratios appear manageable and because of regulatory activity by the Reserve Bank capitalisation has improved significantly since the last downturn. So the banks according to this analysis are well placed and we welcome the positive steps that the banks are taking alongside Fonterra to support dairy farmers.David Bennett: What are the consequences of the recent devaluation of the Chinese yuan for the New Zealand economy?Hon BILL ENGLISH: There is always going to be volatility in the currencies of the countries New Zealand trades with and in the New Zealand dollar which has of course fallen 25 percent against the US dollar in the last year. China’s recent devaluation shows its ongoing commitment to gradually liberalising its financial markets and that is positive for the long-term growth outlook of China although of course a devaluation in the shorter term appears to be a response to softening in the economic outlook for China. Of course that will pose some small extra challenge for the competitiveness of our exports to China.David Bennett: What reports has he received on the performance in other sectors of the economy?Hon BILL ENGLISH: Of course New Zealand has a range of sectors and activities across its economy besides the dairy sector. Earlier today BNZ released the performance of manufacturing index. The performance of manufacturing index for July was 53.5. Readings above 50 indicate expansion. So it is lower by 1.6 points than in June but it still continues a run of moderately strong results. The New Zealand manufacturing sector has now been in expansion for 34 consecutive months. The indication is that that expansion is likely to continue. BusinessNZ says the fall in the New Zealand dollar is now driving positive sentiment in the manufacturing sector which is leaning against the negative impact of lower dairy prices. Today’s performance of manufacturing index result indicates support for future growth although at a more moderate level than the economy was previously running.Dr David Clark: Why are exports dropping and why are they borrowing so much money?Mr SPEAKER: Order! Supplementary—Grant Robertson: We could have that one; I don’t mind.Mr SPEAKER: I will have this one. Grant Robertson—supplementary question.Grant Robertson: Now that 75 percent of major company chief executive officers have joined well-known left-wingers Cameron Bagrie and Federated Farmers in calling for a plan B for the New Zealand economy will he now concede that plan A is not working?Hon BILL ENGLISH: No and I might note that although many of them called for a plan B not one of them was able to say what plan B should be which in that respect is not a lot different from the finance spokesman for the Labour Party. But nevertheless most of those chief executive officersare of course all running adaptable flexible businesses which is consistent with plan A for the New Zealand economy—an economy that can deal with fluctuations in commodity prices and still deliver more jobs and higher incomes to its households.