Budget on May 16
"It is quite a bleak outlook until the country can become more productive and earn more than it spends."Featured comment
Budget 2013 will be delivered on May 16, Finance Minister Bill English says.
The Budget will focus on continued rebalancing of the economy, encouraging savings, investment, trade and growth, and on delivering a government surplus by the 2014-15 financial year, he told parliament's finance and expenditure select committee today.
The most recent updated forecasts show a surplus of $66 million in that year.
The hearing was dominated by debate not so much about the forthcoming Budget but by about what, if anything, the government or the Reserve Bank could do about the high New Zealand dollar.
Facing a barrage of questions from opposition MPs on the issue and on the state of the manufacturing sector, Mr English responded that there is little anyone can do about the exchange rate.
The emphasis of government policy is on improving New Zealand's competitiveness so firms can live in a world where New Zealand's currency is valued more highly than it once was.
He also told Labour, Green and New Zealand First MPs that in arguing for a lower exchange rate they are effectivley seeking a cut in spending power.
"Oddly enough, I'm saying workers need a voice in this debate."
In a particularly testy exchange, NZ First leader Winston Peters demanded the government and Reserve Bank "take action" to bring the currency down.
"Yes, but what action?" was the response from Mr English.
"Should the Reserve Bank put interest rates up or down? The market is likely to look at a rate cut and say, 'well, clearly the next move is up and therefore let's go buy New Zealand dollars'.
"And that will put the exchange rate up further."
While other countries had engaged in quantitative easing and other related money-printing methods, they were nations where real interest rates are negative and real incomes are declining – neither of which is happening in New Zealand.
Countries which have used those methods are also "doing something which has never been done before" and will likely face a painful adjustment further down the track, he says.