Cullen on BOP deficit

“The deterioration in the balance of payments deficit underlines the importance of the government maintaining a stable fiscal policy,” Finance Minister Michael Cullen said.

Dr Cullen was commenting on the latest balance of payments result showing a deficit for the September year of 8.5 per cent of GDP. This was broadly in line with Treasury’s December forecasts and is the largest deficit recorded since 1986.

The deterioration in the quarter reflects weaker exports, particularly dairy, and increased imports.

New Zealand’s net borrowing over the year increased by over $16 billion despite an improvement in net savings by the government of slightly over $2 billion.

Dr Cullen said the result emphasised the continuing structural imbalances in the economy and reinforced the need to encourage a stronger savings culture. The government is endeavouring to do that through initiatives such as the KiwiSaver scheme and changes to the tax treatment of superannuation savings.

“This is yet more evidence of how damaging National’s promises of tax cuts effective 1 April would have been,” Dr Cullen said.

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