IMF says good policies delivered robust growth

Finance Minister Michael Cullen today welcomed the latest report on New Zealand by the International Monetary Fund, which states that sound economic management has resulted in ten years of robust economic expansion.

In its report, the IMF said that the country is now entering a period of greater economic uncertainty and that factors such as higher mortgage rates, high food and energy prices, a slowing housing market and the impact of the drought are likely to conspire to deliver a period of slower economic growth.

In the IMF’s view, a period of slower economic growth is likely to see the easing of some of the economy’s imbalances while high international commodity prices and slowing domestic demand are likely to combine to narrow the current account deficit.

“In its report, the IMF endorses the Government’s fiscal strategy and its focus on the economy’s medium-term interests. It notes that the New Zealand government is in a strong fiscal position,” Dr Cullen said.

In the view of the IMF, the banking sector in New Zealand is sound with stable profits, high capitalisation, and few nonperforming loans although vulnerabilities exist.

The IMF said that New Zealand banks are not exposed to sub-prime lending like in the United States but that current global financial market turbulence has flowed through to New Zealand in the form of higher cost of funding for commercial banks.

The IMF report also endorsed recent work by the Reserve Bank of New Zealand to ensure that the banking sector will remain robust to any further disruption to capital inflows.