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Treasury's Warning Can't Be Ignored

Treasury's warning that the recent slump in confidence will cost output and jobs risks the Government's entire fiscal strategy, National Finance Spokesperson Bill English said today.

"When you load the bulk of your spending into the front end of your fiscal plan, the entire track becomes sensitive to any change in economic circumstances in the short term.

"The Reserve Bank has already lowered its short term growth forecasts by 1.5%, and is hedging its bets about whether that growth will be made up further down the track.

"With business confidence still in the doldrums that hardly seems likely.

"Dr Cullen seems to be taking a great deal of comfort from the fact that the tax- take is currently on track. That is based on stronger than expected growth at the end of 1999. Lower growth now puts a question mark over the future tax-take.

"Some economists are already flagging the possibility of a fiscal deficit this year.

"Dr Cullen must also lower his growth forecasts and take the fiscal consequences. The international investment community needs at least some shred of credibility," Bill English said.


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