David Carter

National Associate Finance Spokesperson 17 December 2001

Clark puts Cullen in awkward position

The Prime Minister has announced her Government is heading for its second spending blow out. The question has to be now asked why has it come from her and not Finance Minister Michael Cullen.

Nationals Associate Finance spokesperson David Carter wants to know is this indicative of tension believed to be growing between the Prime Minister and her Finance Minister.

The Prime Minister's sanctioning of a pre-election spend-up has put Dr Cullen in an awkward position. She knows the pressure to spend is growing as she tries to manage the left side of the coalition, while at the same time Dr Cullen wants to preserve his cherished superfund and is aware of the growing financial market concern about the debt position.

"No matter how worthy the cause, prudent fiscal management is all about being able to manage unforseen circumstances within existing limits. Dr Cullen has already bowed to pressure in his Caucus and blown his spending cap once. It won't be so easy to get away with it a second time.

"There is real concern about the Crowns fiscal position as the growth outlook deteriorates, operating surpluses shrink and the debt outlook deteriorates. Add to that a second spending blowout and all of a sudden it's starting to look like Dr Cullen is losing control of the purse strings.

"Financial commentators are arguing there is already an increased risk premium on New Zealand interest rates given the deterioration in the fiscal position. That means businesses are paying more to borrow for investment and homeowners are paying more for their mortgage.

"Before committing to a second blow-out, with all the associated costs, Dr Cullen needs to be sure there is no room for savings elsewhere. I am not convinced that exercise has been carried out effectively. Where's all the money gone that was tagged for the policy formerly known as Closing the Gaps?

" It is pleasing to see the financial markets looking at the Crown's accounts more closely. Dr Cullen must be nervous that they are probing more deeply than just a shallow analysis of the operating balance.

"It's getting harder and harder to make it all add up" says Mr Carter.

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