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OECD Projects Continuing Economic Growth

"The OECD review of the New Zealand economy projects growth of 3.5 percent this calendar year, 2.9 percent next year and 2.8 percent in 2002," Finance Minister Michael Cullen said today.

"The forecasts reflect the OECD's view, shared by the Government, that confidence levels are out of step with the economic fundamentals, and that these fundamentals will reassert themselves.

"The OECD also echoes the IMF assessment, released last month, that the Government's fiscal stance is "appropriate" but will require close discipline over the next two budgets.

"The Government is aware of this, and has reconfirmed its intention to stay within the $5.9 billion spending cap set in the first year," Dr Cullen said.

The OECD welcomed the Government's Value for Money initiative, the strengthening of the Commerce Act and the reviews into the telecommunications and electricity sectors.

"Its judgement of the Employment Relations Act, while more mixed, offers a refreshing sense of perspective after the silly scaremongering of the Opposition and certain private sector organisations," he said.

Figures published by the OECD showed that New Zealand's productivity growth - both of labour and capital - was well below the OECD average from 1991 to 1998.

"And the report notes that the shift to the ERA moves the New Zealand industrial relations framework closer to the model applying in many other OECD countries," Dr Cullen said.

"But the OECD is critical of those Government decisions which it regards as weakening or backtracking on the economic reforms of the last 15 years.

"Although it freely acknowledges that the economic restructuring process has failed to deliver the expected gains, it believes the Government should keep moving further and faster in the same direction.

"Specific recommendations are for a resumption of the privatisation programme, a capital gains tax, a tax on the imputed rental income of owner-occupied housing [a tax on people for living in their own homes], benefit cuts and a "less generous" public pension.

"The Government considers this extreme, socially unacceptable and economically unnecessary. Our response to the structural problems in the economy is more pragmatic.

"We are engaged upon a modest rebalancing of policy toward the centre and the international mainstream," Dr Cullen said.

Ends

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