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NZ PM returns to talk of economic headwind

New Zealand’s PM Jacinda Ardern has defended the state of the economy amid signs of wobbly growth.New Zealand’s prime minister has defended the state of the country’s economy in her return to parliament, as debate stirs about whether signs are pointing to wobbles in growth.
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New Zealand’s Treasury this week warned upcoming economic growth might not be quite as rosy as forecast during the Labour-led government’s first budget in May, citing a “mixed message” of wage growth and decreased retail spending.

“Although we think growth held up in the June quarter, weaker confidence, in conjunction with other data, highlights the risk that growth over the coming fiscal year may be weaker-than-forecast,” it said

While the Budget Day forecast for GDP growth was about 2.8 per cent, Finance Minister Grant Roberston on Tuesday accepted that could be adjusted by year’s end.

“It may be that they revise that down a little bit, but I’m confident for our long-term plan for the transition of the economy,” he told reporters.

A few other recent economic signs have also been causing headaches.

ANZ Bank’s latest business survey put confidence at its lowest point in a decade and unemployment unexpectedly ticked up from 4.4 per cent to 4.5 per cent in the June quarter.

Those have spurred attacks from the opposition, which says employers are being spooked by the new government’s policies, in particular workplace relations reform, a ban on future oil exploration and a plan to significantly increase the minimum wage in coming years.

Facing questions in her first day back in parliament’s debating chamber on Tuesday, Prime Minister Jacinda Ardern defended the state of the books.

While a cooling of the overheated housing market and the international environment were affecting forecasts, wage and jobs growth were solid, she said.

“When you look at the OECD comparisons around our growth forecasts, actually we stand up pretty well.”

Earlier this week, Ms Ardern told reporters plans to modernise the economy would produce some uncertainty.

The government has in recent weeks played down concerns about business confidence, saying the figures reflect bias on the part of business against Labour-led governments – and changes in global conditions – rather than any change in the domestic economy.

ANZ chief economist Sharon Zollner last month warned dropping confidence would “increases the risk that firms will delay investment and hiring decisions, in what could become something of a self-fulfilling prophecy”.

Markets will later this week be watching to see whether the Reserve Bank of New Zealand will adjust its growth forecasts when it announces its latest official cash rate decision.

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