English denies 'recipe' for recession, hints at tax cuts

Finance Minister Bill English says the dairy industry is a smaller part of the economy than most people think. Photo / File

Falling dairy prices are not as disastrous for the economy as they seem and the country is not heading for a recession, Finance Minister Bill English says.

Mr English told TVNZ's Q+A this morning that the dairy industry was "probably a smaller part of [the economy] than most people think".

"I think we've got to keep the dairy industry in perspective," he said.

"It's about 5 to 6 per cent of the whole economy. It's only 20 per cent of our exports. The other 80 per cent will be starting to enjoy the benefits of the lower exchange rate, and the lower exchange rate will help cushion the impact on dairy of their lower prices."

When asked by TVNZ's Simon Dallow whether he agreed with Steven Bayliss of BNZ that New Zealand had a "recipe" for recession on its hands, with low dairy prices coupled with a potential drought and falling Christchurch house prices, Mr English said he thought the prediction was overstated.

"I think he's stretching it a wee bit here. I think there's a bit more resilience than that in the economy," he said.

"If you pick out all the bits that are going badly, you can paint a bad picture.

"Most of it's actually going okay - migration numbers are up, households will be pleased to see interest rates dropping, our exporters are all seeing a big drop in the exchange rate."

Mr English was so confident a recession was not on the horizon he was able to say tax cuts were likely in the near future.

"We said that we're interested in lower taxes. We've made allowances to be able to execute those."