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Economic Management Must Foster Growth

14 February 2001

PR 15/2001

Economic Management Must Foster Growth

Federated Farmers President, Alistair Polson today told the Finance and Expenditure Select Committee that government expenditure currently at 35% of GDP was too high for sustained growth. The federation was giving its submission on the Budget Policy Statement

"Government expenditure crowds out private investment and innovation" said Mr Polson. "International evidence is suggesting that countries with the lowest levels of government involvement in the economy are the best performers. If New Zealand is to lift its projected growth of only 2 to 3 percent per annum all private industry must be given every means possible to make the best spending decisions for themselves.

"While the federation is pleased to see a cap on new spending initiatives the quality of existing spending decisions must also be improved. Public expenditure needs to be subject to strong monitoring and evaluation processes to ensure costs are constrained. The recent restructuring of the District Health Boards is an example of the need for improved quality of government expenditure. This spending created more administratively hungry organisations, many of which are reported to have already blown their budget.

"The government must realise it needs to provide an environment conducive to real growth. Confidence has been shaken by the aggressiveness of the union movement since the introduction of the ERA as evidenced by the stevedore's dispute and the potentially devastating MAF veterinarian strike" he said.

While the Government is to be commended for planning to run operating surpluses over the forecast period, this must not come through increased taxation."

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