King Colin: Questions for Oral Answer — Questions to Ministers Questions to Members 
Text is incorporated into the Bound Volume 
King Colin: Questions for Oral Answer — Questions to Ministers Questions to Members 
[Sitting date: 13 September 2012. Volume:683;Page:5210. Text is incorporated into the Bound Volume.] 
2. 
COLIN KING (National—Kaikoura) 
 to the  
Minister of Finance 
: What reports has he received on the economy? 
Hon STEVEN JOYCE (Associate Minister of Finance) 
 on behalf of the Minister of Finance: The Reserve Bank this morning issued its Monetary Policy Statement for September which kept the official cash rate unchanged at 2.5 percent. Overall the statement presents a slightly stronger outlook for the New Zealand economy than it presented in its June statement. The Reserve Bank is now expecting annual real production-based GDP growth of between 2 and 3 percent across the projection period out to 2015. The Monetary Policy Statement notes that growth for the March 2012 year also turned out to be higher than forecast. This confirms the Government’s expectations of moderate and sustained economic growth over the next few years. 
Colin King 
: What were the main factors contributing to the Reserve Bank’s stronger outlook for the economy? 
Hon STEVEN JOYCE 
: There are a couple of factors in particular that are worth noting. The Reserve Bank has raised its expectations around the growth capacity of the economy. Its projections for potential growth have been raised slightly for each of the next 3 years with annual growth in potential output increasing from 1.7 percent to 2.3 percent per annum by 2015. This primarily reflects the bank’s more positive view of trend labour productivity growth. A second factor worth noting is the Reserve Bank’s stronger outlook for private consumption. This is likely to be driven in part by wage growth and retail spending data released since the June Monetary Policy Statement. 
Colin King 
: What observations does the Reserve Bank make about the international outlook and its likely impact on the New Zealand economy? 
Hon STEVEN JOYCE 
: The Reserve Bank notes that its international outlook is now slightly weaker than its forecast in June. Overall trading partner growth has been revised down slightly particularly over the next 2 years. There is a risk that international conditions turn out to be weaker than assumed. These changes to the near-term global outlook are driven mainly by small downward revisions to growth expected in Australia China and the euro area in the 2012 and 2013 years. The Reserve Bank notes the outlook for trading partner growth remains uncertain particularly around events in Europe and the apparent slow-down of the Chinese economy. 
Hon David Parker 
: Is the Minister of Finance aware that the Reserve Bank submitters to the consideration of the Monetary Policy Statement announcement today when asked whether his Associate Minister was correct in asserting that a change in the exchange rate has a commensurate effect on the cost of living said that his Associate Minister was wrong; if so will he tell his Associate Minister to get it right? 
Hon STEVEN JOYCE 
: I was not at the committee meeting this morning but I do understand that there was no debate that actually a lower exchange rate does have an impact on the cost of living. Nobody is suggesting that that was not the case. There is some debate about the exact margin but I think we can safely assume Mr Parker that if the exchange rate drops by the sort of 20 to 25 percent that he is seeking then that would— 
Hon David Parker 
: I raise a point of order Mr Speaker. Two times already in question time this week you as Speaker have heard those sorts of incorrect misrepresentations of other parties and have stood Ministers down. The Minister again makes the same assertion in an answer to a question of other political parties’ policies which is wrong and out of order. 
Mr SPEAKER 
: I apologise to the member. My concentration must have—I did not hear that. I would ask the Minister not to make allegations of any policies in respect of another party because the Minister has no responsibility in respect of that. 
Colin King 
: Given the ongoing uncertainty in the international economic outlook what implications is this likely to have for New Zealand’s terms of trade and external position? 
Hon STEVEN JOYCE 
: The Reserve Bank made a couple of observations about our terms of trade and external position. It expects the weaker international outlook and stronger domestic demand combined with the strong New Zealand dollar to result in higher import growth and slightly lower export growth than it predicted in June. However it expects these changes to trade volumes to be offset by a stronger outlook for the terms of trade reflecting recent stabilisation in export prices. Overall the projected current account deficits over the next 3 years are now slightly smaller than forecast in June at 5.4 percent 5.7 percent and 5.2 percent of GDP. This compares with a deficit of 4.9 percent of GDP in the year to March 2012 and is significantly below the average deficits of 8 percent of GDP that the previous Government posted in the 3 years to 2008.