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New Zealand Deficit in the danger zone

Spokesperson for Finance

19 December 2012 MEDIA STATEMENT
New Zealand Deficit in the danger zone

National’s failed promise to rebalance the economy has been shown in today’s current account figures, with the deficit totalling $9.9 billion in the year to September, says Labour’s Finance spokesperson David Parker.

“John Key wants Kiwis to believe he is a good economic manager. Yesterday a 33% increase in the cost of superannuation over the next four years was ignored by him, growth forecasts were further lowered, and unemployment was predicted to stay higher for longer.

"Today's $10 billion external deficit is further bad news. National has spent the last 4 years trying to ignore its promise to rebalance the economy, despite job losses in export industries and the danger to our economy. Economists call it the external or Current Account Deficit. I call it The New Zealand Deficit.

“Yesterday's forecasts show it’s set to get worse, hitting -$17 billion in 2017. The IMF say New Zealand’s external deficit will be second worst in the developed world after Greece this year and worst bar none next year.

“A widening external deficit combined with a stagnant economy and high unemployment is a recipe for failure.

“As a country we are spending more on our imports and interest than we are earning from our exports. We have to sell more assets or take on more debt to cover the costs. That means our companies either go overseas or become less competitive.

“The rules have changed since the global financial crisis. There is far less tolerance for large external deficits. The Government is ignoring this threat at our peril.

“Bill English says there is little the Government can do. He is wrong.

“Labour would increase our savings through universal KiwiSaver, reducing our need to borrow overseas. We would make sure those funds are invested in high-growth exporting companies through tax reform such as a capital gains tax and a research and development tax credit, helping us earn more from overseas and creating more export jobs.

“We would also require the Reserve Bank to consider the exchange rate and other important aspects of the economy, instead of the primacy of inflation trumping exports. That will help make our currency more competitive and stable, something exporters are crying out for.

“These solutions are needed now. A massive New Zealand Deficit will be a legacy of this National Government.”

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