NZIER's confidence comforting - but justified?
"Let's hope the NZIER's confidence that the economy will come out of the current "flat patch" and regain momentum next year proves correct. But this is far from guaranteed," Labour finance spokesperson Michael Cullen said today.
Dr Cullen was commenting on the release this morning of the NZIER's latest set of quarterly predictions. The Institute is forecasting real GDP growth of 3 percent in the year to March, 2000 rising to 4 percent the following year.
"The forecasts will no doubt be seized on shamelessly by the Government as a vindication of its economic policies. In anticipation of the usual chest-beating, I would point out that the growth foreshadowed by the NZIER is essentially cyclical and reflects a strengthening world economy rather than any specific New Zealand or Government initiative.
"Labour remains sceptical about how quickly the recovery will flow through to the export sector. And the NZIER itself acknowledges that part of the reason why its growth forecasts look high is that they are coming off a very low base," Dr Cullen said.
The NZIER report includes a discussion of the policy implications of a change of Government.
"Clearly the NZIER continues to believe that New Zealand's economic problems will self-correct and that the only role for government is to stand on the sidelines and watch the market perform its magic. It can hold to this belief only by resolutely ignoring the evidence of the past few years.
"The weakness in New Zealand's external accounts, and the NZIER's own forecast that the balance of payments deficit will balloon out to over 7 percent of GDP, point to several structural flaws.
"The Institute is right to identify the need to increase national savings. Labour's policy to partially pre-fund the future costs of New Zealand Superannuation through a dedicated tax taken from existing taxation is our response to that challenge.
"But we have no intention of following the Institute's advice and redesigning our scheme to include individual accounts and participation by the private sector. We reject it for the same reasons we rejected Winston Peters compulsory super' model - because it would lead to increased costs and would be less equitable.
"As to the Institute's concern at the dangers of having a "large centralised fund under direct control of government," I can only sigh and once again invite them to actually read our policy.
"If they did, they would know that the fund will be managed by a independent board and that there will be a legal requirement that the money in the fund can be used only for superannuation payments," Dr Cullen said.