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Growth offering New Zealand government bigger surpluses: Treasury

Xinhua, December 8, 2016 Adjust font size:

New Zealand's economy is expected to grow by an average 3 percent annually over the next five years, according to forecasts from the Treasury out Thursday.

Real annual gross domestic product (GDP) growth would peak at 3.6 percent next year and tail off to 2.3 percent in 2021, according to the Half-Year Economic and Fiscal Update.

Unemployment, currently at 5 percent, would fall off to 4.3 percent over the same period.

Finance Minister Bill English, who on Thursday secured the backing of enough of the ruling center-right National Party legislators to become prime minister next week, said the forecasts were considerably stronger than they had been when he delivered the annual Budget in May.

"The more positive outlook for the economy is driven by high levels of construction activity, exports (particularly tourism), a growing population and low interest rates," English said in a statement.

While last month's 7.8 magnitude earthquake in the South Island town of Kaikoura had a major impact on affected families and businesses, they were not expected to disrupt the overall momentum of the economy, English said.

Treasury estimated the total fiscal cost of the earthquakes would be about 2 billion to 3 billion NZ dollars (1.44 billion to 2.16 billion U.S. dollars).

The government's operating surplus was forecast to be 473 million NZ dollars (341.17 million U.S. dollars) this year, rising to 8.5 billion NZ dollars (6.13 billion U.S. dollars) over the forecast period.

The forecast showed net debt peaked as a proportion of GDP at 24.6 percent in the 2015-2016 and is expected to fall to 18.8 percent by 2020-2021.

Opposition lawmakers called on English to stop promising tax cuts in the run-up to next year's general election and to use the surpluses to address outstanding economic issues.

Tens of thousands of people were being left behind, homeless and out of work, said Grant Robertson, finance spokesperson for the main opposition Labour Party.

"The country's economic growth is a sandcastle based on rampant house price inflation, high personal debt, and on population growth that is putting pressure on infrastructure and public services pressure that this government is failing to address," Robertson said in a statement.

"On a per-person basis New Zealand is hardly growing at all. It's no wonder people are feeling that they are working longer hours, but they are only treading water. And the forecasts today are for almost no real wage growth in the next two years."

Surpluses gave the government scope to address long-term deficits it had been racking up in health, housing, and the environment, said Green Party co-leader James Shaw.

"The quality of these essential public services is suffering and its past time to restore and enhance them," Shaw said in a statement. Endit