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Global economic challenges are serious

Hon Dr Michael Cullen
Minister of Finance

5 August 2008 Media Statement

Global economic challenges are serious

The seriousness of the global economic headwinds affecting New Zealand means that sensible, transparent management of the economy is increasingly important, Finance Minister Michael Cullen said.

Monthly economic indicators just released by the Treasury include its assessment that the second quarter of 2008 probably experienced negative growth. This trend is being experienced around the world as the global economy battles rising food and oil prices and the continued fallout from the global credit crunch. New Zealand’s situation was exacerbated by the drought that affected a number of regions earlier in the year.

“Since 2000 New Zealand has experienced the longest period of economic growth since World War II,” Dr Cullen said.

“But even after that strong growth and having achieved one of the world’s lowest unemployment rates, we cannot expect to be immune from a serious global financial storm.

“The Labour-led government’s $10.6 billion tax cut plan will provide some relief for households and will stimulate economic growth. The Treasury expects growth to pick up in the second half of the year as a result of the Labour-led government’s tax cuts, falling interest rates, and strong export earnings.

“Importantly, our tax cuts are being delivered without breaking the bank and without putting the stability of our economy at risk. We will not have to abandon our target of keeping debt around 20 per cent of GDP and we will not have to cut KiwiSaver or Working for Families, two programmes that are very important for the health of our economy and the security of our families.

“As we work our way through this downturn, the government will continue to be open and honest about our plans for the economy. And we will continue to argue that now is precisely the wrong time to be implementing credit card economics that would put all of the success of recent years at risk for no good reason.

“Nothing about our current strength and resilience can be taken for granted.”


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