Gyles
Beckford, Business
Editor
- International Monetary Fund report
urges action on finances, growth,
housing - Annual report expects NZ
economy to grow 1.4 percent this year, 2.7 percent in
2026 - Structural reforms needed to
tackle deficits, urges tax
reforms - Time to start serious talk
on long term superannuation costs
The
government needs to get control of its finances and make
broad based tax and regulatory changes to bolster growth,
according to the International Monetary Fund (IMF).
In
its annual health check on the country, it said the economy
has come through the recession and it expected growth of 1.4
percent this year, and 2.7 percent in 2026.
Current
financial and monetary policies were said to be appropriate
with an emphasis on tackling deficits, and further official
cash rate cuts by the Reserve Bank (RBNZ).
“The
macroeconomic environment provides a window of opportunity
for New Zealand to consider broad-based reforms needed to
address medium and long-term challenges,” the report
said.
It said those challenges included getting
government finances in shape, lifting productivity,
addressing persistent infrastructure and housing supply
gaps, and looking at the costs of an ageing
population.
The IMF said lifting housing supply should
be a key priority.
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“Bold reforms are needed to free up
land supply, incentivise efficient land use, and ensure
adequate financing of local infrastructure.”
Recovery
underway
It forecast medium-term growth to be driven
by migration, but “significant” structural reforms were
needed to get better than modest growth.
The report
said the economy would struggle if the labour market
remained soft, and households and businesses were still
under pressure, while rebuilding government finances by
retaining savings, contained debt, and getting the best
value for its spending would help avoid that.
But the
IMF report reiterated a common theme of recent reports – the
need for tax reform.
“Options include a comprehensive
capital gains tax, a land value tax, and judicious
adjustments to the corporate income tax regime,” the report
said.
It warned that any moves to improve competition
in the banking sector should be handled carefully to ensure
the financial system remained stable.
The IMF again
suggested the country needed to consider how to cope with
the long term costs and pressures of ageing.
“It is
essential to initiate early dialogue among all stakeholders
regarding comprehensive reform options that can help
mitigate these challenges — and other long-term spending
pressures from healthcare and aged care needs – with fair
burden-sharing across
generations.”
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