If you read this as we send out this newsletter, we are just preparing to meet with the International Monetary Fund (IMF) delegation visiting Wellington for their biennial Article IV consultation. 

The IMF conducts these comprehensive economic assessments of its member countries every two years. Their teams analyse economic and financial developments. They meet with government officials, central bankers and organisations like ours before publishing their findings. 

This afternoon, Dr Eric Crampton, Dr Bryce Wilkinson and I will present The New Zealand Initiative’s assessment of New Zealand’s economic challenges and our reform recommendations. 

We believe it is vital that the IMF delegation understands what is happening in our economy. Their final report will include recommendations that shape policy debates and influence how international markets view New Zealand. 

Our message to the IMF is straightforward: New Zealand needs fundamental reforms across multiple fronts.  

New Zealand’s economic prospects remain fragile. While inflation has retreated to within the RBNZ’s target band, the legacy of policy mistakes continues to burden our economy.  

Government spending and public debt remain too high, with Treasury projections showing deficits throughout this decade. We will emphasise that monetary policy must remain focused on price stability. We also believe it is vital for the Reserve Bank to learn from its past mistakes to prevent future policy errors. 

On fiscal policy, we will stress the need to return government spending to sustainable levels. The structural deficit of 2.7% of GDP is dangerous. A credible path back to surplus must be established, including expenditure prioritisation and, potentially, asset sales. 

Housing affordability remains a critical issue driven by supply constraints. We need liberalised planning rules and better incentives for councils to welcome development. 
Competition policy also needs reform. In our view, the focus should be on making it easier for new competitors to enter markets. This is preferable to government or regulators intervening in competition directly. 

New Zealand must address its restrictive stance on foreign investment. As the OECD’s most restrictive country for foreign direct investment, we are starving ourselves of capital. 

The current government has taken positive steps in these fields, but implementation will take time. Whatever can be done to speed up and deepen these reforms would be most welcome. 

When the IMF publishes its findings in a few weeks, we hope it will join us in advocating for a freer and more dynamic New Zealand economy.