Finance Minister Nicola Willis at an Electra business breakfeast at Southward Car Museum. Photo / David Haxton
The economy was front of focus when Finance Minister Nicola Willis addressed an Electra business breakfast audience in Kāpiti’s Southward Car Museum this morning.
About 230 people attended the breakfast, keen to hear from Willis, who had delivered her first Budget a week earlier.
She described the Budget as a “clean-up job after six years of economic mismanagement”.
“We’re very focused on careful spending, lower taxes, and rebuilding the economy.”
She said the Budget was about “fiscal discipline to get back to surplus and lower debt, infrastructure investment for the growth we want to see, and savings across government so we can responsibly not only give tax relief but the increased investments that our frontline services in health, education, and law and order, require”.
Willis recognised it had been “a tough time for families and businesses nationwide”.
“What’s apparent now, compared to even six months ago, is that the current downturn that we’re in, started earlier, has been deeper, and is expected to last for a bit longer than previously thought.”
But there were “better times ahead”.
“What our analysis shows is that our economy is fundamentally robust and it is going to recover well.
“The official forecasts, in the Budget update, show the current weak demand in the economy is doing what Adrian Orr wants it to do, which is reduce those inflationary pressures, which means we’re going to see a gradual easing of interest rates.
“As those interest rates come down, we’re going to see economic activity pick up.
“That is predicted to start in the second half of the year, and then the economy is predicted to continue growing next year.
“I’d identify where we are right now as at the steep part of the hill, we’re almost at the top, and then it’s downhill.”
She said forecasts showed “an improving outlook”.
“It’s this simple: inflation is coming under control, interest rates are coming down, growth is recovering.”
Willis said the Government was “deliberately taking a medium-term, sustainable approach”.
“We don’t want to overreact and we think it’s very important to look after New Zealanders while we get the books in order.”
She said to grow the economy “we need good responsible Budgets, good responsible investments, but also, we need to drive reform across those areas that are holding us back”.
“Our Government has a five-pronged agenda of things we’re focused on — infrastructure, education, regulation, overseas connections and innovation.”
Willis said, “We are determinedly a cabinet of driving change.
“I want you to know that the Prime Minister is a man of action and he’s working us at pace.
“He isn’t particularly patient with the idea that things can take six months when he thinks they can probably get done next week.
“That means we’re working with a sense of urgency.”
On the tax relief aspect of the Budget, Willis said the Government was elected to “give a fairer deal for hard-working New Zealanders”.
“What we’ve seen, over the past 14 years, is no changes for tax settings for working people.
“This distinguishes New Zealand from most other countries in the world we like to compare ourselves with, many of which automatically adjust their tax thresholds to compensate for the effects of inflation.
“You can’t fix it all but in the Budget we’ve prioritised tax relief for lower- and middle-income families with children, with some tax benefit for 94 per cent of households.
“So average income households will be up $102 a fortnight better off.
“The tax package comes into effect from July 31 and means money will be hitting bank accounts from mid-August.
“I would put it to you that it will give a welcome boost to confidence at a time when people need it.”
She said the Government had been “very careful with how we’ve constructed the package”.
“It’s fully funded so as not to add pressure to inflation.
“The advice I’ve received from Treasury is that because of the way we’re funding it, the margin is potentially disinflationary.”
On local matters, Willis received a round of applause when she said the Government had listed Ōtaki to North Levin as a priority road of national significance.
“We’re going to get it done and I reckon you’re going to find Tim [Ōtaki MP Tim Costley] on that first digger, with his hard hat on, ready to go.”
