IMF praises direction of NZ economy

IMF managing director Christine Lagarde with NZ PM John Key.Photo / Audrey Young

IMF managing director Christine Lagarde was full of praise last night for the direction in which the New Zealand economy was headed.

After meeting Prime Minister John Key on the fringes of the Bo'ao Forum for Asia, in China, she talked to New Zealand reporters about the general health of the economy in light of a recent assessment of fiscal and monetary policy.

"All I can tell you is the IMF is very supportive of what is being done by the Government in that respect.

"If you look at the numbers, if you look whether it is growth, whether it is employment, whether it is inflation, whether it is debt, overall it is very stable and it is also very promising.

"If you compare the potential growth rate of New Zealand and thee forecasts we have which I will not disclose because they will be disclosed in a couple of weeks time, it's certainly a lot better than what we see in other parts of the world.

"An economy grew on the basis of its components - resources, manpower, capital, financial markets and policies and policies and the policies we believe are sound and solid."

She declined to give her view on the Bank of Japan's announcement last week to embark on a massive programme of quantitative easing designed to double the money supply and stimulate the economy.

She said she would give her views on the move in a speech today at the Bo'ao Forum, an annual event in China that brings together business and political leaders.

Ms Lagarde said Asian economies had been the main driver of growth in the past five years ever since the global financial crisis started ''and I just cant think what growth would have been like had it not been for Asia contributing to growth."

China had been a key driver and she indicated the growth would have no big fluctuations.

"We've all along said that China would have a soft landing, if any, and clearly the forecasts we have for China in 2013 -14 do not indicate a hard landing and hardly a soft landing."

Commenting on the North Korea security crisis she said ''any disruption of a political or geo-political nature is not good for the economy, let's face it."

Ms Lagarde, a former Finance Minister of France, was appointed to the IMF job in 2011 after the resignation of compatriot Dominique Strauss-Kahn following allegations he had sexually assaulted a hotel maid. No charges were laid.

Mr Key said his Government's message was that not everything in New Zealand was perfect "but we are going in the right direction."

He said he and Ms Lagarde also discussed the United States and European economies. The outlook for America was better and the outlook for Europe was "still very challenging."

He said her comments about New Zealand were "great news."

"They are independently looking at New Zealand. They try and give an objective view and it matches it with what makes sense.

"New Zealand is now very much part of Asia and this trip is an example of what's critically important to New Zealand."