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Cullen falls silent on fiscal challenges

14 December 2004

Smooth Cullen falls silent on NZ's long-term fiscal challenges

The Labour Government's Budget Policy Statement is devoid of strategic thinking and wilfully ignores the major fiscal challenges ahead for New Zealand, the Green Party says.

"For all his smooth rhetoric, Dr Cullen falls silent when it comes to tackling the big economic problems facing our nation," Green Co-Leader Rod Donald said.

"Dr Cullen is smug about the nice, fat wallet in his pocket, but he has failed to deliver the long-term, strategic plan we need to future proof our economy.

"New Zealand faces some major fiscal challenges in the coming decades - such as our ageing population, the balance of payments and trade deficits, how to respond to the impacts of increasing oil scarcity and climate change and the need to clean up contaminated sites - but Dr Cullen has no serious plans to deal with them.

"The Government has its head in the sand when it comes to oil. Expecting the price to drop to $US35-a-barrel (page 30) shows Treasury has learnt nothing from its Budget debacle, where it projected oil would drop to $US19.50-a-barrel."

The facts are: oil demand is growing (the Government admits this growth is structural), oil reserves are depleting and, logically, oil prices will continue to trend up, not down.

"Dr Cullen was also being completely irresponsible in his mapping out of the fiscal consequences of our ageing population," Mr Donald said.

"He has forecasted that underlying health spending, before adjustment is made for demography and inflation, will actually fall after 2007. Given New Zealand's spiralling health costs brought on by a quickly ageing population, this is scarcely credible financial forecasting.

"The Government's avoidance of New Zealand's balance of payments and trade deficits is of major concern.

"The BPS reveals that the Government will be making no real effort to tackle or take seriously the balance of payments problem. It forecasts that the current account deficit will run at 6 per cent of GDP in 2007.

"It is time for the Government to acknowledge that we've got a permanent, structural balance of payments deficit, otherwise we will have to keep selling off New Zealand and / or increasing national debt to pay for our failure to control spending.

"Labour should be using its large projected surpluses to invest in more sustainable infrastructure, such as rail and public transport and renewable energy and conservation. It should also be providing our young people with a taxpayer-funded education to ensure they are highly productive and committed citizens," said Mr Donald.

ENDS

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