Hon Dr Michael Cullen
Minister of Finance

19 March 2008 Media Statement

John Key should be honest about the economy

John Key’s calls for optimism on the economy in a time of serious challenge does not fit with his past record of recession mongering, Finance Minister Michael Cullen said today.

“I will continue to speak honestly about our economic challenges,” Dr Cullen said. “I will make no attempt to brush over the pressure households and businesses are facing.”

Yesterday, Dr Cullen told reporters:

“Given drought, given the international financial turmoil, given the credit squeeze, given the housing market coming off, it would be foolish to rule out the possibility that there could be two successive quarters of very small negative growth at some point in the next year or so.

“But we are not expecting to see the economy going through the floor. I think people when they hear the word think of depression and something long, sustained and with large increases in unemployment. I don't see the prospect of that.”

Today, Mr Key said that such talk could be damaging for the economy.

This is despite the fact that in early 2006 he repeatedly talked up the prospect of a recession. He told Radio New Zealand in March 2006 that there was “a real risk” of recession. On 28 March 2006 he repeatedly referred to the likelihood of a recession during questioning in Parliament.

Just last week, Mr Key admitted to Mikey Havoc that he had been talking the economy down, saying:

“…I think, look, the economy's really slowing down.”

And when asked about predictions of an economic slowdown he made six months ago he said:

KEY: Um, I was, I was out there actually being a bit negative, or saying, saying, you know, look, I was a bit concerned about the, the economy, but I mean one of the things, and I often say this to business audiences particularly when I get up is that, look, I, it's very easy when you're the leader of the opposition to, sort of, see shadows because, you know, quit honestly in weaker economic conditions, Governments often get booted out, and, um, so you've got to be careful you don't get too negative on things when you're an opposition politician, because you can, you can see bad things in, in a lot of things, and that may not always, you know, always be right, so, um ...
PRESENTER: Nobody likes a stirrer.
KEY: Yeah, I have been a bit negative on the economy, and I think with ...

ENDS

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