Economy needs more than 'milk, houses and disaster' - Grant Robertson

The New Zealand economy is overly reliant on "milk, houses and disaster" and will see a significant slowdown in economic growth rates in the near future as recent one-off stimulus wear off, Labour finance spokesman Grant Robertson says.

In a speech before the May 21 government budget, he said the record migration surge explained almost half the current economic growth rate of 3.3 percent, while the Canterbury earthquake rebuild was estimated to account for about a third of current growth.

"The re-build of Canterbury is now propping up the economy," Robertson told a Dunedin audience.

Falling dairy prices would take $7 billion from the economy, compared to last season. Excluding the impacts of strong inward net migration took 3.3 percent growth back to 1.8 percent, he said.

"The Treasury tells us that there will be 3% growth this year. This is good news compared to countries struggling to find much growth at all, or going backward. Yet many New Zealanders are not feeling it."

While Auckland was enjoying a boom based on the wealth effects of skyrocketing house prices, regional New Zealand and people seeking affordable housing were left out.

"We need more than an economy built on milk, houses and disaster," he said. "It is high time for the government to clamp down on foreign speculators and ensure affordable housing is being built."

Labour's plan to deal with the supply shortage underlying Auckland's house price boom is to have the government build large numbers of affordable homes quickly.

"KiwiBuild was our attempt to deal with that issue. My challenge to the government is that, if that is not the right answer, what is yours? Surely it can't be to sell state houses and tinker about with the RMA (Resource Management Act)?"

Mr Robertson called for a "plan to diversify our economy, support and grow exports, build up our regions, build affordable housing and invest wisely in our education, research and development and our infrastructure" in next Thursday's budget. "We need investment in sectors like ICT, high-value manufacturing, wood processing and biomedical science."

Labour has yet to articulate new economic policy but Robertson said the country needs "an active policy of targeted financial investment, support for research and development through tax credits, stronger innovation partnerships, procurement policies that give Kiwi firms a fair go, support for education, especially regional polytechnics and encouragement of positive migration to the regions."

That was necessary to turn around the fact that the "'two New Zealands' as articulated last year by Moody's rating agency, is now really a tale about the fortunate few and the rest."

Robertson stressed "Labour's view that we must generate wealth before we can distribute it."

"The challenge we must face up to is to ensure that the chance to generate that wealth is available to all."

(BusinessDesk)