A tale of two deficits
Spokesperson for Finance
18 December 2012
A tale of two deficits
National’s economic plan is plainly failing, with its own forecasts showing an external deficit of over -$10 billion for each year for four years, rising to -$17 billion by 2017 says Labour’s Finance spokesperson David Parker.
“National wants us to focus on the government deficit, and to ignore the external deficit.
“Why? Because they want to forget their promise to rebalance the economy. But we must not ignore our $10 billion a year (and rising) deficit. Economists call it the Current Account Deficit. I call it The New Zealand Deficit.
“It is worst in the developed world after Greece this year. It’s predicted by the IMF to be the worst in the developed world next year. Treasury says it will be negative $17 billion in 2017.
“Our drop in export competitiveness is why we are losing jobs. We are not exporting enough to pay for our imports and interest. Every year The New Zealand Deficit results in more debt saddling Kiwis and the sale of our assets to foreigners.
“The rules have changed since the global financial crisis and large external deficits are less acceptable now.
“A widening external deficit combined with a stagnant economy and high unemployment is a recipe for failure
“The credit agencies have said they are increasingly concerned about The New Zealand Deficit
“Above -5% of GDP is ‘the danger zone’, the point at which international creditors get really worried.
“Treasury is forecasting the $17 billion external deficit in 2017 will equal -6.5% of GDP, and this is at the low end of the forecast range
“Infometrics are predicting a deficit of -6.6% of GDP in 2014 and the NZIER are forecasting our external deficit to reach –9.9% of GDP in 2017
“Bill English says there is not much we can do about it.
“This is simply irresponsible. No wonder unemployment is predicted to stay higher for longer.
“National haven’t delivered on their promise to rebalance the economy
“There is a lot that can be done, National needs to get stuck in and take a hands-on approach to the economy - pull the levers only a government can pull: change monetary policy, introduce pro-growth reforms including universal savings and a CGT to rebalance the economy.
“National’s biggest plan for this three years was to sell our state assets, which is floundering. This was never going to increase jobs or exports, and shows how bereft the government is of ideas to improve our economy.
“What growth there is is largely the result of the
Canterbury earthquake as insurance proceeds are spent on the
rebuild. National cannot claim credit for that.”