12 August 2005

Key clutching at straws

Finance Minister Michael Cullen said John Key was clutching at straws, and weak straws at that, in his latest attempt to attack Labour’s popular student loans policy.

“The fact is that the amount which will be written off as a consequence of removing the requirement to pay interest on student loans will have no impact on gross debt.

“It will have a one-off impact on the operating balance in the year the policy is introduced but the only long-term influence on the Crown accounts will be on Crown net worth where the impact will be negligible.

“Crown net worth is projected in the budget forecasts to reach 35.4 per cent of GDP in 2008-09. With the interest free student loans policy in place, this would reduce to around 34.5 per cent of GDP.

“Hardly a threat to the excellent fiscal management Labour has established in government,” Dr Cullen said.

“The technical adjustment does show the danger of using the operating balance as the basis on which to calculate if tax cuts are affordable.”

ENDS

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