Deputy Prime Minister Grant Robertson spoke to business leaders at a breakfast held by Westpac. Photo / NZME
Deputy Prime Minister Grant Robertson says he remains optimistic about New Zealand's future despite the economic and geopolitical challenges facing the world.
But the Government will focus on providing targeted support rather than the broad-based approach it has taken in recent years in response to Covid.
The Minister of Finance was speaking at a breakfast briefing for business leaders hosted by Westpac New Zealand.
The event was meant to be a chance for Prime Minister Jacinda Ardern to speak to the business community in the wake of Monday's ditching of the Covid traffic light restrictions. But she pulled out to attend the Queen's funeral in London.
Robertson said the Government's Covid measures had saved lives and jobs.
"But we cannot deny that they also cast a shadow, especially on New Zealander's mental health."
Robertson said that removing the measures gave certainty back.
But as New Zealand looked towards a positive summer, much of the world was turning to a hard winter.
"We welcome back our tourists, our migrant workers, our international students as the clouds begin to darken over our friends elsewhere in the world and the markets we export to.
"The global outlook for the world's economies is sobering. The IMF's most recent outlook was titled 'Gloomy and more uncertainty'."
The IMF predicts global growth will be three percentage points lower in 2022 than it was in 2021.
Robertson said much of the world was experiencing an energy price shock, skill shortages and supply chain blockages, while at the same time interest rates were being lifted to battle the inflation impacts.
"Europe is entering uncharted waters with energy prices 10 times higher than before Russia's war on Ukraine. Globally diesel prices increased 74 per cent in the last year.
"Citigroup recently said it expected inflation in the UK to reach 18 per cent in the first quarter of 2023 - the highest level since 1976."
In the US inflation was at its highest in a generation and there were fears of it entrenching while growth in China had slowed to below 4 per cent.
New Zealand was not immune to aspects of that, Robertson said.
While New Zealand's inflation was lower than the OECD average it had caused a significant cost-of-living crisis for New Zealanders.
"Everyone has taken a knock. It has required the Government to step forward with significant out-of-cycle support."
But he said New Zealand also had economic advantages.
"We are a country that is in demand. Our goods exports are near record highs because even though the global economy is struggling what we offer to the world is something the world needs."
He pointed to New Zealand's tourism sector and said Queenstown's ski season was back to 80 per cent of pre-Covid times while international student enrolments were nearly at 50 per cent of pre-Covid times.
Robertson acknowledged the labour shortages many businesses were facing.
But he said so far the Government had approved 7200 job check applications and more than 25,000 working holiday scheme applications had been approved since May.
"Thousands more holiday-makers are expected to arrive in the coming months."
He said the PM has been on a number of international trade missions in the past few months to Japan, Singapore, US and Australia with business delegations.
"On each occasion, we have seen the strength of operations and how in demand NZ is."
Next month he will lead a business delegation to New York as part of Air New Zealand's new direct flights.
He said New Zealand's economy needed resilience and diversification.
"We don't expect businesses to build that resilience and diversification on their own."
The Government would continue to help on that front.
"But we all have a responsibility now to chart a course through what will be some rocky seas and despite all that is in front of us I believe without a doubt NZ will succeed."
Robertson said future investment from the Government would not be able to be on the same scale as during Covid.
"As with all of you with the emergency response behind us now we will enter a period of more targeted spending.
"This type of period will require some tough choices. At a broad level my focus will remain on ensuring New Zealand maintains responsible debt levels and ensuring our path back to surplus. This must however not be done through austerity cuts to spending.
"This would do more damage than any problem we were trying to solve."
He said that meant more targeted investment where it was needed the most and where it could bring the most bang for buck for New Zealand as a country.