Bill English National Finance Spokesman

14 June 2001

Growth forecasts take another drop down

The latest NZIER forecasts confirm National's prediction that the Government's growth and fiscal view is more optimistic than its policies can deliver, National's Finance spokesman Bill English said today.

"For some time now I have been predicting that economists would start revising down their growth and operating balance forecasts, and revising up their debt forecasts. Here's the evidence.

"Growth for 2002, picked at 3.5 percent in the 2000 Budget and revised down to 2.6 percent by Treasury, has taken a further hit, down to 2.3 percent in the NZIER forecast. This reflects the likelihood of slowing world demand, with domestic growth just managing to pick up the slack from weaker exports.

"NZIER is forecasting that the surpluses over the next three years will be $2.4 billion lower than Treasury was picking.

"The result of those lower surpluses is that NZIER is forecasting net debt to be at 20 percent of GDP by 2005, compared to Treasury's forecast of 18 percent.

"The lower forecast growth profile would also mean a smaller improvement in the current account deficit. Treasury was picking 3.5 percent of GDP; NZIER is forecasting 5.3%.

"Every time these forecasts are revised downwards, so is Dr Cullen's credibility as a prudent fiscal manager.

"The Budget revealed Dr Cullen is going to ioncrease Government debt. This forecast signals that the increase in Government debt is likely to be substantial" Bill English said.

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