Government “opening of the books” shows wasted opportunity
“The economic and fiscal forecasts in the pre-election update – the ‘opening of the government’s books’ – shows how the Government has failed to grasp the opportunity of the Global Financial Crisis to rebalance the economy,” says CTU economist Bill Rosenberg. “We are seeing forecast economic growth rates that peak in March next year and rapidly decline to the mediocre – around 2.1 percent and well below growth rates in the 2000s before the crisis. The current account deficit blows back out to over 6 percent of GDP within two years. Productivity growth is forecast to be mediocre and falling.”
“This is an economy which relies on commodity exports with notoriously unreliable returns as Bill English reminded us, an earthquake rebuild and construction in Auckland. The high value, high wage economy is nowhere in sight,” Rosenberg says.
“The forecasts show real wages falling behind productivity growth over the next four years, meaning wage and salary earners will not be getting their share of what the economy can afford. Unemployment is forecast to still be above 5 percent in 2016, with 132,000 unemployed. The best it gets is 4.5 percent (117,000 people), despite New Zealand doing much better during the 2000s.”
Rosenberg says that the Government’s forecast of its own expenses show falls in real spending per person affected in Health, Education and Social Welfare and Working for Families. “These count on state service employees continuing to tolerate pay increases below the rest of the workforce, along with major restructuring and loss of services after the election if National is returned to power. Even using all the forecast operating allowances to fill the gaps would not be enough – and that does not allow room for new or expanded services. Tax cuts would make the position even worse.”
“The excessive focus on cutting spending ignores growing deficits and imbalances elsewhere in the economy and society. They cannot be ignored for ever. They include low wages, high levels of inequality and poverty, climate change, the ageing population, the unbalanced economy, and growing gaps in health and education. These policies will leave a legacy of social, economic and environmental deficits for future Governments,” Rosenberg said.