Key Says New Zealand Is Coming Out of Recession

By Tracy Withers

July 15 (Bloomberg) -- New Zealand Prime Minister John Key said he agrees with Reserve Bank Governor Alan Bollard’s assessment that the economy is recovering from a recession.

“That tallies with what he’s been privately telling us, that we’re starting to come out of this recession, which is good news,” Key told Television New Zealand today. “The governor is in a good position to assess both the international markets and the domestic market.”

Bollard yesterday said the economy, which has been in a recession since the first quarter of last year, is likely to start recovering earlier than some of its trading partners. The central bank has cut borrowing costs to a record low and Key has reduced income taxes and boosted infrastructure spending to kick-start demand.

The government will develop policies to bolster exports and improve productivity in industries that sell goods overseas, Key said earlier in a speech in Wellington. The six main policy drivers are regulatory reform, infrastructure investment, better public services, education, innovation and a world-class tax system, he said.

Key wants increased output from exporters rather than growth fanned by consumer spending and borrowing, which widens the nation’s trading deficit and increases debt.

“There has been insufficient growth and investment in the internationally competitive sectors of the economy,” Key told a business audience. “Because of our poor export growth, our current account deficit has grown unsustainably large.”

The deficit was 8.5 percent of gross domestic product in the year ended March 31 compared to 4.5 percent in the U.S.

Key said New Zealand needs to encourage business investment and run a more efficient public sector. The government will also review the tax system.

“We can’t consider our tax system in isolation,” Key said. “The government will be watching closely what comes our of the Henry review of taxation in Australia.”

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.