07 June 2006 Media Statement

National's offshore borrowing to fund tax cuts would deliver Standard & Poor downgrade

International ratings agencies are warning that proposals to significantly increase the government's levels of overseas debt, in order to fund short-term tax cuts for high income earners with no children, would risk a downgrade to the country's credit ratings.

"Families with mortgages should be in no doubt about the consequences of the warnings contained in today's Standard & Poor's analysis that shows that the ageing of New Zealand's population could see New Zealand's excellent credit rating savaged if combined with bad government policies," says Progressive leader Jim Anderton.

"Bad policies - like increasing overseas debt - combined with the ageing profile of the population, could quickly undo all of the good work to future- proof our economy with the New Zealand Superannuation Fund, KiwiSaver and strong fiscal surpluses of the Labour-Progressive government," he said.

"The government's accounts show clearly that there is not one cent available to deliver National's election tax cuts-for-the-childless-rich bribe.

"In fact, after taking account of our investments in the NZ Super Fund, tertiary education improvements and transport funding increases, the government will actually be running cash deficits in each of the next few years.

"There is only one way that National and its allies could cut taxes: by putting out the begging bowl to Japanese and Belgian housewives and other overseas investors looking to make a quick buck by lending us the money at very high rates of interest.

"But the cost would be much higher borrowing costs for every small and medium sized business in the country, rising unemployment and higher and higher mortgage financing costs for every working family in the country for years to come," he said.

ENDS

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