English bitter-sweet on economy

Bill English speaks at the New Zealand Herald Mood of the Boardroom gathering. Photo / Paul Estcourt

Finance Minister Bill English was in friendly territory at yesterday's Mood of the Boardroom function to deliver a bitter-sweet snapshot of the economy.

The Herald survey of chief executives and small to medium-sized firms delivered a 72 per cent approval for his Government's economic leadership, with the minister himself scoring a 4.06 rating out of five.

By contrast 98 per cent of those surveyed said Labour has yet to begin carving out a credible alternative to the Government.

Tackling the Budget deficit and cutting budget expenditure is a priority for 53 per cent. The bureaucracy was singled out by 85 per cent as a top target for cuts.

English said there was no more money for the next three to four years for the public sector.

Some government departments were twice as big as they were five years ago.

"The Government underestimated the extent to which the public sector had been infused by a culture of fear and waste. That's a potent mix," he said.

"There's a lot of softness that we have to get at but the public is extremely sensitive to changes to frontline services."

Weakness in the housing market was a sign of consumers being careful while the export sector was improving, English said.

Home buyers were starting to realise interest rates were on the way up.

"I suspect that's going to keep the housing market damp for some time yet. By any international measure our housing market is still way overpriced. I'm expressing that as a personal view - ours and Australia's housing markets are even more expensive on average than China."

English said that it appeared over time it was going to stay that way.

Ninety per cent in the survey want to see partial listing of state-owned enterprises.

English said what was saleable was only a small part of the $200 billion balance sheet.

Speaking after the breakfast gathering in Auckland, he trod carefully after six weeks ago raising the possibility of privatisation of Kiwibank.

"The Prime Minister has said we're going to kick the tyres on whether the policy can or should change."

In the meantime the Government was demanding better performance and transparency from SOEs while retaining funding arrangements.

"If we've got a growth opportunity we'd finance that by forgoing dividends or if they want to grow we go and borrow the money for that investment."

Regulation rated just behind labour productivity for its effect on confidence.

English said reform of the resource, building and food laws was under way but there was no "one big shot" on regulation.

Ninety-five chief executives took part in the survey which was run over three weeks from June 7 to June 25.

They were drawn from the Deloitte Top 200 list, Government trading enterprises, professional firms and business organisations.

About 259 heads of BusinessNZ's member firms also took part.