Bayly Andrew: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeBayly Andrew: Oral Questions — Questions to Ministers[Sitting date: 10 September 2015. Volume:708;Page:6525. Text is incorporated into the Bound Volume.]1.ANDREW BAYLY (National—Hunua) to the Minister of Finance: What reports has he received on the New Zealand economy?Hon STEVEN JOYCE (Associate Minister of Finance) on behalf of theMinister of Finance: The Reserve Bank this morning issued its latest monetary policy statement. The Reserve Bank indicated that economic growth has slowed since its previous forecast. It now expects growth of around 2 to 2.5 percent over the next 18 months before increasing to 3.1 percent in the year to March 2018. The bank cut interest rates from 3 percent to 2.75 percent and signalled it may cut further. The bank expects inflation to be back in the 1 to 3 percent target range early next year. Lower interest rates of course support businesses wanting to invest and also help households with a mortgage.Andrew Bayly: What are some of the drivers of the Reserve Bank’s economic forecast?Hon STEVEN JOYCE: The Reserve Bank’s lower growth outlook was driven in part by a softer international outlook particularly in Asia which has led to financial market volatility and renewed falls in some commodity prices. This has been offset to some degree by expansion in the United States. Closer to home the Reserve Bank also outlined a number of risks—in particular the decline in export prices and lower business and consumer confidence. The bank also highlights several factors continuing to support growth domestically including robust tourism immigration the large pipeline of construction activity in Auckland and importantly the lower interest rates and the depreciation of the New Zealand dollar.Andrew Bayly: Given global economic uncertainty how is a lower interest rate supporting New Zealand’s economic resilience?Hon STEVEN JOYCE: New Zealand’s independent monetary policy and floating exchange rate frameworks are natural buffers from which New Zealand is now benefiting following recent volatility in the commodity prices and increased global economic uncertainty. Rising interest rates and exchange rates in the upswing of the economic cycle lean against growth and reductions in the interest rate and exchange rate support the economy when growth slows. For example US dollar exports that were worth NZ$100 in July last year are now worth around NZ$140. Exporters who were forced to become more efficient when the exchange rate was US88c have reaped the rewards now the exchange rate has fallen.Andrew Bayly: What other reports has he received on the resilience of the New Zealand economy and how does that compare internationally?Hon STEVEN JOYCE: Treasury has collated a list of which countries have firstly a broadly balanced Government budget; secondly have net debt less than 40 percent of GDP; thirdly have economic growth greater than 1.5 percent; and fourthly have scope to further cut interest rates should the economic situation worsen. New Zealand meets all of those criteria and is in fact doing considerably better in some of them. There are only four other OECD countries in the world that meet those criteria. The others are Australia Norway Iceland and South Korea. So by those measures the economy is well placed to deal with any turbulence in the international economy.