Hide: Key & Cullen Irresponsible
Key & Cullen Irresponsible: ACT's Recovery Package
Rodney Hide MP
Thursday, October 16 2008
Address to ACT Economic Policy Launch; ACT Offices, Level 11, Bowen House, Parliament; 10:30am, Thursday, October 16 2008
Yesterday Sir Roger Douglas and I received a briefing from Reserve Bank Governor Alan Bollard and the Treasury's Peter Bushnell.
It was a comprehensive briefing. We appreciate their work in a fast-moving and very tough time.
It's clear to us that the problem for New Zealand is economic as well as financial. It's also clear that the political response from John Key and Michael Cullen has been both woeful and irresponsible. Their policy promises will make tough times worse.
New Zealand has been in recession all year. Our forecast growth is 0.1 percent. Our current account deficit is $14 billion a year. That's 7.8 percent of GDP. The financial crisis makes that tough to fund, which will add further to rising costs for families and businesses but benefit those exporters who can service their loans.
The forecast cash deficit for the Government is $6-$7 billion over the coming years. That's going to be tough to service. The forecast is undoubtedly optimistic.
Michael Cullen's response is to spend even more money. Core government spending has increased more than $20 billion in 10 years. It's set to increase another $20 billion in just five years.
John Key has accepted that spending track. The fact is that small businesses and Kiwi families can't afford it.
Michael Cullen's response to the financial crisis - and the election - has been to increase spending further in the belief that a ‘Keynesian' stimulus will work. It won't - if it did, we would not have been in recession all year. In fact, the spend-up will make it harder for New Zealand to borrow the money it needs to fund both the government and the current account deficit.
Michael Cullen's response has been to spend money we haven't got.
John Key's response has been to confirm Michael Cullen's spending track and to direct the Cullen Fund to buy up large chunks of New Zealand assets, as if having the Government buy up New Zealand is a solution to New Zealand's economic woes. It's nuts.
The Cullen Fund takes $2 billion a year from Kiwis, which they now can ill-afford. Key's response to the financial crisis is to direct $800 million of that into buying up Telecom shares, land and other assets. It directly undermines the fund's purpose and does nothing to improve New Zealand's economic performance except shift ownership from private hands to the State. That's why the Greens and New Zealand First endorse the policy. And, amazingly, Michael Cullen doesn't considering it too socialist.
It's always a good time for good economic management. In today's environment, it's crucial. That's why a Party vote for ACT is vital this election. We will ensure the next National-led government puts an end to unbridled government growth. Not by some slash and burn policy, but by capping the growth of government expenditure to the rate of inflation plus population growth. That will enforce efficiencies and proper budgeting within government and allow dramatic reductions in taxes boosting family budgets and the economy.
ACT will ensure that extra yearly growth in expenditure is freed up to be productively used by the private sector to provide jobs, growth, increased production and real wealth for the nation.
It will allow the immediate abolition of Michael Cullen's damaging and pernicious 39 cent tax rate. A Party vote for ACT will ensure that tax is gone by Christmas.
The unchecked growth in government expenditure is the single biggest factor weakening our economy. Stop it. Not cut it, but stop any growth beyond inflation, and we'll be on the way to a real economic recovery and positioned for real tax cuts in three to four years.
Only a Party vote for ACT will give National the backbone they need to put New Zealand back on track.
ACT Economic Policy Launch; ACT Offices, Level 11, Bowen House, Parliament; 10:30am, Thursday October 16 2008.