Joyce disagrees with Treasury's per-capita GDP forecast

Thursday 16th June 2016

A string of better-than-expected data points to faster economic growth on a per capita basis than Treasury's projections, Economic Development Minister Steven Joyce says.

Data released by Statistics New Zealand earlier this morning showed gross domestic product per capita had edged up just 0.1 percent in the first quarter. In its Budget economic and fiscal update released at the end of May, Treasury said annual average per capita GDP growth was "expected to remain low at 0.5 percent in June 2016 and increase modestly to 0.9 percent in June 2017."

Questioned by Labour's David Clark about that prediction at Parliament's commerce select committee, Joyce said per-capita GDP was growing and he disagreed with Treasury's forecasts.

"Treasury predicts reasonably low per-capita GDP growth for the next couple of years, but actually, I think it will be stronger than that," Joyce said. "Why do I think that? A lot of the economic performance indicators, including yesterday's balance of payments information, was better than previously."

At a separate committee this morning, Finance Minister Bill English said GDP per capita was a useful measure in the long run, and it was down because "we've had a surge in people ... that's been more rapid than expected."

If migration slowed to what was in line with Treasury assumptions "you'd see per capita lift up", which the government wants to see, English said.

Treasury's migration assumptions are based on long-run averages.

Strong tourism numbers have underpinned New Zealand's economic growth over the past year, and Joyce was asked about 'Project Palace', the New Zealand Trade and Enterprise programme to try to increase the number of international investors in hotels in New Zealand. A report released last month showed New Zealand would need another 4526 hotel rooms, or 26 hotels, by 2025 to cope with expected increased visitor numbers.

Joyce said he had met with a number of investors already investing in New Zealand hotels when he was in Vietnam and Singapore, and they had been very interested in the report.

"A number of them indicated they would be keen to make a further investment in New Zealand," Joyce said. "If we can provide quality background information that speeds up that investment, that's good."

BusinessDesk.co.nz

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