New Zealand forecasts 2.6 percent growth

Prime Minister Helen Clark's government expects growth to average 3 percent for the next four years

WELLINGTON, New Zealand (CNN) -- New Zealand is forecasting growth of 2.6 percent for the year to March and an average of 3 percent for the next four years.

Releasing the 2001 budget on Thursday, Finance Minister Michael Cullen said New Zealand's growth outlook was "steady" and did not exhibit the volatile boom and bust pattern of the 1990s.

Lobby group the Business Roundtable welcomed the budget's "business friendly" policies but warned any breach of the government's spending cap could harm growth prospects.

The government is limiting net new spending to $264 million (NZ$629 million)

The New Zealand stock market's benchmark Top 40 index ended slightly stronger Thursday, up 3.74 points to 2049.49, while the New Zealand dollar eased against the U.S. dollar, trading at 41.8 U.S. cents after the budget was released.

Current account deficit to fall

Cullen said the 2001 budget forecast an operating surplus of $270 million ($NZ641 million) and larger surpluses in the three years after that.

The current account deficit, which was 7 percent of gross domestic product when the Labor-Alliance government of Prime Minister Helen Clark took office in December 1999, would fall to 3.3 percent by March 2005.

He said the Clark administration was committed to transforming the New Zealand economy.

It would pay particular attention to education, because all the evidence showed that the most important prerequisite for lifting productivity and growth rates was increasing human capital.

An extra $196 million would be pumped out over four years for education, targeting adult literacy, early childhood education and better training for school principals.

Cullen said the government would commit $42 million to set up the New Zealand Venture Investment Fund. This would develop the venture capital industry, help commercialize research and get more businesses "on the path to global success".

It would also make an initial contribution of $252 million to the New Zealand Superannuation Fund and $504 million in 2002-03.

But Cullen said unless private savings also rose, New Zealand's savings record would "remain very unsatisfactory."

NZ Treasury

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