Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 

Budget Statement Confirms Growth Strategy Needed

Budget Policy Statement Confirms Growth Strategy Needed

"The Budget Policy Statement confirms the government has a lot of work to do to achieve its growth targets", Roger Kerr, executive director of the New Zealand Business Roundtable, said today.

Key features of the economic outlook presented by the government include the following:

• Annual growth in real gross domestic product (GDP) over the five years to June 2007 is projected to average just under 3 percent, with no signs of a trend increase.

• This rate is below the average annual growth rate of 3.3 percent achieved in the 10 years to 2002.

• It is also a significant margin below the expected medium-term Australian growth rate which is put at an average of around 3.5 percent a year.

• Unemployment is projected to remain stuck at around the current rate of 5.3 percent of the labour force; it is not trending down towards the prime minister's goal of a 3 percent rate.

Mr Kerr said that the most relevant indicator to track for the purposes of assessing progress towards the government's goal of returning New Zealand to the top half of the OECD income rankings was growth in real GDP per head.

Information on trends in real GDP per head is not presented directly in the Budget Policy Statement and December Economic and Fiscal Update. However, in its recent Quarterly Predictions, the New Zealand Institute of Economic Research forecast average increases in real GDP per head of under 2 percent per annum over the next five years. This outlook is consistent with the BPS/DEFU economic outlook, which also shows labour productivity growth (a key factor in growth of real GDP per head), remaining static at an assumed 1.5 percent a year.

Mr Kerr said that in a speech last week the minister of finance said that the annualised rate of growth of the economy of perhaps 4.5 percent in the first half of this year, "if sustained over a 5 to 10 year period, would more than likely return New Zealand to the top half of the OECD." This statement is incorrect. It refers to GDP, not GDP per head, and neglects the fact that annual population growth has been running at around 1.5 percent recently, making the annualised rate of growth in real GDP per head closer to 3 percent. A Treasury paper published last year suggested, on a range of assumptions, that growth in real GDP per head of between 4.6 percent and 7.4 percent per annum is required for 10 years to reach the government's goal.

Mr Kerr said it was pleasing that the government's fiscal projections were broadly in line with its targets and that the ratio of government spending (core Crown expenses plus contributions to the New Zealand Superannuation Fund) was projected to fall slightly to below 32 percent of GDP.

"The government should reinforce this trend by lowering its long-term objective for government spending from 35 percent of GDP to 30 percent. No comparable OECD country has achieved the government's targeted growth rate with New Zealand's levels of total government (including local government) spending. Together with the elimination of the dubious Superannuation Fund, this would pave the way for significant tax reductions and tax reforms which would also boost growth."

Mr Kerr said that next year would mark the tenth anniversary of the introduction of the Fiscal Responsibility Bill into the House. The resulting legislation had served New Zealand well in some respects – in particular, by making the government's financial position more transparent and avoiding post-election surprises – but not in others. It had not effectively constrained government spending, and the Budget Policy Statement had not served as a basis for effective public and parliamentary engagement with the government about budget policy, as originally intended. The Business Roundtable would be making suggestions for improvements to the Fiscal Responsibility Act 1994 in its submission on the 2003 Budget Policy Statement.

Mr Kerr said that New Zealand was continuing to enjoy moderate economic growth, due in part to recent favourable conditions but in particular to earlier economic reforms. However, it was not showing signs of moving to a higher level. The minister of finance had recently stated that it would be possible to judge whether the government was on track to meeting its more ambitious growth objectives by 2004. "Time is running out", Mr Kerr said. "A recent Herald report indicated that only 5 percent of the business leaders surveyed thought the government had an effective growth strategy. Developing a credible strategy is now a matter of urgency."

© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On The Peters/Ardern Triumph

There are a lot of good reasons to feel joyful about this outcome. It is what so many young voters – the best hope for the country’s future – wanted.

Far more important than the implications for the Economy Gods ( is the dollar up or down? ) last night’s outcome will also mean many, many vulnerable New Zealanders will have a better life over the next three years at least.

Yet the desire for change was in the majority, across the country..>>>More


Reaction

Labour on its agreement |Peters: Post-Election Announcement Speech | Greenpeace “cautiously hopeful” about new Government | ACT - Madman on the loose | E tū ecstatic | Chamber welcomes the outcome | Greens on their joining Govt | EDS welcomes new govt | Immigrant groups worry | Feds ready to engage new coalition government | Labour Ministers of the Crown announced

 

Climate: Increasing Greenhouse Emissions Hit NZ

New Zealand is seeing impacts of excess greenhouse gas emissions in our climate and oceans, according to the latest national report from the Ministry for the Environment and Stats NZ about the state of the atmosphere and climate…More>>

ALSO:


Wellington.Scoop: Arrests At Blockade Of "Weapons Expo"

“We encourage people in Wellington to get down to the Westpac Stadium now for a day of awesome peace action. There will be plenty of food, music and activities to keep us sustained through the day.” More>>

ALSO:

Rorschach Restructuring: PSA Taking Inland Revenue To Court Over Psychometrics

The Public Service Association will be seeing Inland Revenue in Employment Court over its intention to psychometrically test employees reapplying for their roles at the department as part of its controversial Business Transformation restructuring plan. More>>

ALSO:

Nuclear Disarmament: Nobel Peace Prize 2017 Awarded To ICAN

Congratulations from iCAN Aotearoa New Zealand to international iCAN, the other iCAN national campaigns and partner organisations, and the countless organisations and individuals who have worked so hard for a nuclear weapons-free world since 1945. More>>

ALSO:

Expenses: Waikato DHB CEO Resigns

An independent inquiry has identified that Dr Murray had spent more than the agreed $25K allocated for relocation costs, and other unauthorized expenses involving potential financial breaches of the chief executive’s obligations. More>>

ALSO:

Wellington.Scoop: Sad About The Trolley Buses?

The Regional Council’s MetLink is today spending money to tell us that it really loves Wellington’s trolley buses, even though they’re all being taken off our roads by the end of this month. More>>

ALSO:

Post-Election: Preliminary Coalition Talks Begin

New Zealand First will hold post-election preliminary discussions in Wellington with the National Party tomorrow morning and the Labour Party tomorrow afternoon. More>>

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

Featured InfoPages

Opening the Election