NZ economy facing biggest challenge in two decades
Friday, 29 August 2008
WELLINGTON, Aug 28 (AFP): New Zealand is facing its most challenging economic conditions for two decades, Finance Minister Michael Cullen said today.
Economic growth figures out next month are expected to show New Zealand slipped into recession in the June quarter in a second straight quarter of contraction.
"Today New Zealand is facing a serious economic challenge generated by the global credit crunch and steep rises in global commodity prices," Cullen told a superannuation conference in Auckland.
"These are the most complex and challenging set of economic forces we have confronted in at least two decades."
Cullen said New Zealanders faced pressures on household budgets due to high fuel and food prices and continuing high mortgage interest rates, despite the central bank's quarter percentage point cut to the official interest rate last month.
He said there would be relief with further cuts to interest rates and a cut to personal tax rates due to take effect in October.
The government would maintain a tight hold on its spending to ensure further upward pressure was not put on interest rates.
The central bank cut the official interest rate-for the first time in five years-by 0.25 percentage points in July to 8.0 per cent but the rate remains one of the highest in the developed world. Cullen said New Zealand had a poor savings record and this was reflected in a negative net international investment position equivalent to 86 per cent of gross domestic product.
"Among rich, developed nations, only Iceland has a higher level of national debt on such a measure," he said.
To address the poor savings record, last year the government introduced the voluntary KiwiSaver superannuation scheme for all workers, in which employee contributions would be topped up by employers and the government.
A total of 770,000 workers-more than expected in a total population of 4.2 million-have so far joined the scheme.
"What we are seeing through KiwiSaver is nothing short of a savings revolution in this country."
Economic growth figures out next month are expected to show New Zealand slipped into recession in the June quarter in a second straight quarter of contraction.
"Today New Zealand is facing a serious economic challenge generated by the global credit crunch and steep rises in global commodity prices," Cullen told a superannuation conference in Auckland.
"These are the most complex and challenging set of economic forces we have confronted in at least two decades."
Cullen said New Zealanders faced pressures on household budgets due to high fuel and food prices and continuing high mortgage interest rates, despite the central bank's quarter percentage point cut to the official interest rate last month.
He said there would be relief with further cuts to interest rates and a cut to personal tax rates due to take effect in October.
The government would maintain a tight hold on its spending to ensure further upward pressure was not put on interest rates.
The central bank cut the official interest rate-for the first time in five years-by 0.25 percentage points in July to 8.0 per cent but the rate remains one of the highest in the developed world. Cullen said New Zealand had a poor savings record and this was reflected in a negative net international investment position equivalent to 86 per cent of gross domestic product.
"Among rich, developed nations, only Iceland has a higher level of national debt on such a measure," he said.
To address the poor savings record, last year the government introduced the voluntary KiwiSaver superannuation scheme for all workers, in which employee contributions would be topped up by employers and the government.
A total of 770,000 workers-more than expected in a total population of 4.2 million-have so far joined the scheme.
"What we are seeing through KiwiSaver is nothing short of a savings revolution in this country."