David CUNLIFFE
Finance Spokesperson

3 October 2011

Downgrades mock Key’s ‘right arm’ claim

Last Friday’s twin credit rating downgrades for New Zealand make a mockery of Prime Minister John Key’s claim last week that ‘most countries would trade their right arm for our position’, says Labour’s Finance spokesperson David Cunliffe.

“Last week, just before the downgrades, John Key said New Zealand was in much better shape than most countries. If that is the case why has Fitch downgraded New Zealand, alongside Greece, Hungary, Iceland, Ireland, Mexico, Portugal and Spain, and yet left three-quarters of OECD countries without a downgrade?

“That doesn’t make sense if, as Bill English claims, ratings agencies endorse the approach the National Government has taken toward our economy,” David Cunliffe said. “Quite clearly they don’t endorse what National is doing --- otherwise they would not have downgraded us while leaving the great majority of OECD countries untouched.

“One of the real worries for New Zealand, under National’s economic mismanagement, is that the Government still seems unable, despite the twin downgrades, to heed the messages the rating agencies are delivering. In fact, Bill English still stubbornly says National will stick with its policy settings, despite Fitch making it clear that it considers us to be ‘an outlier among rated peers’ in terms of our level of net external debt.

“Our downgrades have happened not because of an international problem, as National claims, but because of a New Zealand problem,” David Cunliffe said. “Most countries would not trade their right arms or anything else for our external debt problem. John Key and Bill English might be happy to muddle through, but the agencies are not impressed.

“National’s ‘tax switch’ that delivered big cuts to the top and higher GST for all has not helped. Swingeing service cuts and hands-off economic management are not what the ratings agencies or the public want to see. A Labour government won’t just ‘muddle through’. Labour has a cohesive economic plan that addresses the structural problems New Zealand faces. We are committed to:

• A capital gains tax (CGT) to cut public debt to zero by 2021 and reduce the tax incentive for property speculation;
• A strong prudent fiscal policy with a fully-costed manifesto;
• Strong savings policy for a bigger and better KiwiSaver that will lift New Zealand’s savings rate and close the savings gap;
• Monetary reform to reduce the volatility of the exchange rate and ease long term interest rates to assist exports;
• Economic development policies that will boost business growth and exports.

“National is asleep at the wheel,” David Cunliffe said “Labour believes New Zealand’s future is too important to take it for granted.”

ENDS

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