WELLINGTON, June 8 (Xinhua) -- A report by the International Monetary Fund (IMF) that warns New Zealand's currency needs to be significantly lower in value to contain a rising current account deficit sparked a debate Friday of the government's handling of the economy.
The IMF 2012 staff report on New Zealand said the pace of the country's economic recovery was "likely to remain modest" with projected growth of 3.25 percent next year led by the reconstruction of the earthquake-battered Canterbury region.
It said the government's aim of returning to a spending surplus in 2014-2015 would limit any adverse affect on economic growth during the recovery and put the government in a better position to deal with future shocks.
However, it warned, "New Zealand's large net liabilities present a risk. Despite recent improvements, the current account deficit is projected to increase over the medium term as earthquake reconstruction activity gains pace and global interest rates normalize."
To contain this increase and limit a long-term buildup of foreign liabilities, the New Zealand dollar would need to be weaker than its current level, although its strength could dissipate over time with the eventual tightening of policy rates by major central banks.
Finance Minister Bill English said the report confirmed the IMF 's support for the government's economic plan and its focus on getting back to surplus and increasing national savings.
"The IMF endorses our approach to getting back to surplus and the rationale behind it," he said in a statement.
"We are making progress and, compared to a lot of other countries, New Zealand is in reasonably good shape," English said.
"But it's important that we remain focused on becoming more competitive and productive, and giving businesses the confidence to invest and grow, because that is how we will create more jobs and higher incomes.
"This cannot happen through fast-rising government spending and debt, as it has in the past."
However, the opposition Green Party said the report highlighted the need for the government to have a wider economic plan, rather than "a narrow fixation on achieving fiscal surplus."
Green Party co-leader Russel Norman said the IMF found that " the New Zealand dollar would need to be about 15 percent weaker than its current level" to stabilize the net international investment position at 2009 levels.
With this year's Budget, delivered last month, projecting New Zealand's net international debt to exceed 200 billion NZ dollars (152.88 billion U.S. dollars) in coming years, a return to surplus was important, but "should not come at the expense of wider economic policy," said Norman in a statement.
"It is not too late for the government to start listening to exporters and domestic manufacturers who are being made uncompetitive by our over-valued currency and are crying out for action on monetary policy," said Norman.
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