The IMF is predicting New Zealand's growth rates will be well ahead of other OECD countries in the face of a delicate moment for the global economy, Finance Minister Grant Robertson says.
Grant Robertson says there is no doubt key risks for the international economy identified by the IMF will impact on New Zealand as a small trading nation. Photo: reb
Two days ago the International Monetary Fund cut its forecast for world economic growth this year as the global economy slowed more than expected, raising risks of a sharp downturn.
The impact of trade tensions between the United States and China and issues in Europe, including Brexit and some poorer performing economies among EU member countries, were among key risks contributing to a "delicate moment" for the global economy, IMF chief economist Gita Gopinath said.
In its third downgrade since October, the IMF said the global economy will likely grow 3.3 percent this year, the slowest expansion since 2016. The forecast cut 0.2 percentage points from the IMF's outlook in January.
The projected growth rate for next year was unchanged at 3.6 percent.
Mr Robertson, who is at IMF and World Bank meetings in Washington, told Morning Report the IMF was predicting New Zealand's growth rates will be well ahead of other OECD countries.
However, with economies slowing down in other parts of the world, there would be an impact for New Zealand as a small trading nation. The economy remained strong with sound fundamentals, including relatively low debt, low unemployment, and surpluses in the 2018 Budget.
"I would note that the IMF does expect things to pick up a bit more in the second half of the year." Finance Minister Grant Robertson
Asked if the IMF's outlook would mean taking a more cautious approach to Budget spending, Mr Robertson said strong fundamentals provided "some room to move" and it was important that governments played their part in supporting the economy in a time of downturns. Treasury was yet to finalise its forecasts, he added.
Government will consider responsibility to spend more
Was there pressure on the government to open its chequebook and spend to provide some fiscal stimulus? "The Reserve Bank's given some signal where they're heading
at 1.75 percent; perhaps they have a little bit more room to move than others but those decisions are for the governor of the Reserve Bank," Mr Robertson.
"What I do know is that fiscal and monetary policy do need to work together and as I say one of the factors we'll be bearing in mind is what our role is when the economy slows a little and what we can do to support the continuation of New Zealanders' living standards.
"I would note that the IMF does expect things to pick up a bit more in the second half of the year ... but monetary and fiscal policy do need to support one another absolutely."
Inflation was stable and projected to stay at the Reserve Bank's mid-range of 2 percent, he said.
Asked if the new monetary policy system that will be used for the way the next Reserve Bank rate is set, Mr Robertson said it would be useful to have a committee structure, bringing in voices from "the real economy" with people who had backgrounds in employment and agricultural economics.
"But obviously the majority of the committee members remain the Reserve Bank staff.
"They do a lot of very thorough work in assessing where they're heading so I think there'll be some fresh voices at the table but the broad direction of New Zealand's monetary policy we've set with the remit that's signed between myself and the governor and that's consistent with where they've been since we've been in government."