IMF concludes New Zealand has the right balance

Finance Minister Bill English has welcomed the International Monetary Fund’s conclusion that the Government’s deficit reduction programme strikes the right balance between supporting growth and limiting public debt.

In its Preliminary Concluding Statement (embargoed until midnight tonight NZ time), the IMF says New Zealand’s macro-economic policy stance is appropriate and that the monetary policy should continue to be the first line of defence against adverse shocks.

And it notes that economic growth appears to have strengthened in the last few months of 2012.

The IMF says: “We regard the planned pace of deficit reduction as striking the right balance between sustaining output growth and limiting public debt growth, and consistent with a policy setting where monetary policy plays a primary role in managing aggregate demand. The benefits of the plan are many.”

Mr English says the IMF’s assessment reflected the balanced and pragmatic approach the Government had taken with its economic programme over the past four years.

“The IMF notes there are many benefits to the Government’s plan. It is withdrawing fiscal stimulus at the right time by making room for private sector and earthquake-related reconstruction spending.

“It has also improved the macro-economic policy mix by reducing pressure on monetary policy. The programme also allows New Zealand to deal with aging and healthcare costs, and to cope with any future shocks.

“Finally, as the IMF concludes, the programme could help to increase national savings, reduce the current account deficit and limit the increase in New Zealand’s foreign liabilities.”