Introduction (continued)
Mr Speaker,
The New Zealand economy has grown modestly but steadily, despite significant headwinds.
The efforts of all New Zealanders, supported by the Government's policies, are delivering results in difficult circumstances.
Since the recession, the economy has expanded in nine out of the past 10 quarters. Looking ahead, growth is forecast to rise to more than 3 per cent in 2014/2015.
Though moderate by historical standards, New Zealand's growth outlook is stronger over the next few years than that forecast for the Euro area, the United Kingdom, Japan, the United States, and Canada. It's similar to forecast growth in Australia.
Households and businesses have started to save and pay down debt. New Zealand's household savings rate is positive for the first time in a decade, and is forecast to increase to almost 4 per cent by 2016.
That is a positive and encouraging sign.
Increased savings will temper economic growth a little in the short term, but over time will leave New Zealand considerably less vulnerable to economic shocks.
Job creation is picking up. Over the past two years, 60,000 more people have been employed, and the Treasury expects a net 154,000 new jobs over the next four years. Unemployment is forecast to drop below 5 per cent by 2015.
Growth in the near term will be driven by a number of factors.
The rebuilding of Christchurch will be a key driver of domestic activity and is expected to contribute about one percentage point to annual growth in each calendar year from 2012 to 2016.
Our two largest trading partners - Australia and China - are forecast to maintain reasonable growth rates, therefore keeping up demand for our exports. We are also well placed to benefit from trade with other fast-growing economies in the Asia Pacific region.
And our terms of trade are expected to remain relatively high on the back of demand for our major export commodities.
These opportunities will be supported by Government policies to encourage businesses to invest, grow, and employ.
However, the global environment remains volatile.
In particular, the Euro area and the United Kingdom have yet to resolve the huge problems caused by a long-term reliance on debt and government spending to drive economic growth.
This global weakness and volatility means New Zealand must focus on the issues it can directly control, including getting back to surplus, reducing government and private sector debt, and improving competitiveness.
New jobs are created and incomes grow only when businesses have the confidence to invest, take risks to employ more people, and pay better wages from higher revenues.
Growth in the 2000s was built on unsustainable foundations - excessive spending, including from the Government, and high levels of household debt.
We are moving towards growth that is driven by savings, exports, and productive investment in the parts of the economy that trade with the rest of the world.
It is within this context that I present Budget 2012.
