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Zero Stimulus Budget

CTU Media Release

19 May 2011

Zero Stimulus Budget

Today’s Budget does nothing for jobs when unemployment is high and risks prompting a return to recession. It forecasts low growth continuing this year, and that even by March 2012, unemployment will still remain high at 5.7 percent.

Bill Rosenberg, CTU Economist said “Despite this gloomy outlook for the coming year, the government will be spending little more than last year. This amounts to a $2 billion cut in real terms when inflation forecast, at 3.1 percent is taken into account. Even Treasury says that this will provide zero stimulus, and the government is resting on assumptions of growth resulting from reconstruction in Christchurch. There is a real risk of continuing high unemployment or even going back into recession.”

“We do need to face up to debt but when it is the third lowest in the OECD, it should not have trumped the immediate needs of people who are struggling, and a stagnant and fragile economy. It ignores the hard times that many families are facing at present,” said Rosenberg.

The CTU welcomes the commitment of a $5.5 billion fund for the Christchurch reconstruction. Rosenberg said “Once again however, $740 million of it will be funded from cuts elsewhere. But we welcome the step to use Kiwibonds to raise the remainder, and suggest they could be used more widely to fund government infrastructure.”

“The Budget has seen the Health services that people directly access, receive almost $110 million less in real terms, than they need to keep up with costs, population growth and aging, and to pay for the new treatments people need. This will lead to another round of cuts by DHBs as they try meet already constrained Budgets.” Said Rosenberg. “Many of the new initiatives announced in Health will have to be paid by cuts in health services elsewhere.”

“They’ve halved the KiwiSaver member tax credit and increased minimum contributions for both employees and employers. This will significantly decrease the value of KiwiSaver savings for when people retire, particularly for low income families and make it impossible for many people to continue saving.”

“Working for Families changes will impact on households with incomes as low as $35,000. Households on $35,000 are the least well placed to shoulder any cuts to their weekly budget. This Budget should have been about lifting their income not cutting it.”

“The legacy of this budget will be stifled growth, continued unemployment, reduced savings and higher levels of poverty.” said Bill Rosenberg.

ENDS

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