Finance Minister Grant Robertson: IMF numbers show why Govt needs a 'rainy day' fund

Finance Minister Grant Robertson said the IMF report is a timely reminder of why the Government is ensuring the books are in order. Photo / Brett Phibbs

New figures from the International Monetary Fund (IMF) show why the Government's "rainy day" fund is important, Finance Minister Grant Robertson has said.

The Fund's World Economic Outlook was released today and shows a downward revision in global growth forecasts over the next two years.

Global growth is down 0.2 percentage points from April, to 3.7 per cent in both 2018 and 2019.

A further escalation in trade tension is part of the reason for the downgrade, with the IMF warning any further moves towards a trade war could "significantly harm global growth".

Robertson said the report is a timely reminder of why the Government is ensuring the books are in order and "strong enough to protect the economy and New Zealanders from any rainy day such as changes in the international economy."

Yesterday, he revealed the Government has a $5.5 billion surplus and has met its Budget Responsibility Rules four years early.

But both he, and Prime Minister Jacinda Ardern, have said it is important the Government has this money as a buffer in case of a "rainy day".

"Economists have been warning about growing risks in the international economy, particularly due to rising trade protectionism, which we need to be well-placed to face in case this flows through to the New Zealand economy."

Speaking to reporters at the release of the Government's financial statements yesterday, Robertson said a further deterioration in the global trade environment is something the Government needs to be prepared for.

Robertson stressed today that the healthy books reflected the Government's position for the year ended June 30 and the better-than-expected surplus was, in part, due to "one-off factors".

"Calls for ongoing increases in spending need to keep in mind that there first needs to be confidence that the better-than-expected results will continue year after year, as opposed to just being a one-off."

Former ANZ Chief Economist, now head of Bagrie Economics, Cameron Bagrie, said yesterday's numbers have more to do with the previous Government than the incumbent one.

That is because the numbers were influenced by National's 2017 Budget, he said.
"The good news is, [this Government] has got a good starting position but the fiscal impact of the new Government is only really going to start in this financial year."

He said he will be keeping a very close eye on the Government's tax-take numbers in the second half of this year.

"The tax take was pretty robust in the first half of the year, when the economy was in pretty good shape."

But he said indicators like consumer confidence, business activity and hiring intentions have things slowed down.

"Whether that manifests into actual hard data is the million-dollar question."

The Treasury will release its next set of economic forecasts in mid-December which will reveal how well the economy is expected to track in the coming years.