23 November 2010 Media Statement

National fiddles while credit rating outlook burns

Standard and Poors have decisively rejected National's economic approach by returning New Zealand's sovereign credit rating to negative watch after just eighteen months at neutral, says Labour’s Finance spokesperson David Cunliffe.

"After 18 months of empty growth projections, broken promises and unaffordable tax cuts, National has no-one to blame but itself," David Cunliffe said. “Standard and Poors is clearly worried that updated forecasts due to be released next month will show growth forecasts being revised downward.

"Standard and Poors has been very clear that National has failed to deliver on two crucial economic fundamentals: closing the yawning domestic savings gap and closing down New Zealand's growing international debt, with Treasury forecasting the current account to return to unsustainable levels.

"Because that debt is overwhelmingly private debt, the Government cannot solve the problem simply by trimming its own budget,” David Cunliffe said.

“Strong action was required to lift economic growth and tax receipts, targeting tax cuts where they were needed at the same time as dealing with New Zealand’s savings problems. Instead, National's tax cuts pandered to its wealthy constituencies and added billions to public debt, much to Standard and Poors’ dismay. National also cut KiwiSaver and suspended contributions to the Super Fund.

"It has taken a gob-smacking two years to even set up a committee to look at the massive savings gap that Labour has consistently highlighted as a crucial need.

"Even before the Savings Working Group started, Bill English ruled out Australian-style strong savings policies, despite evidence that Australia's huge local savings pool has been a key driver of growth and rebuilding,” David Cunliffe said.

"Meanwhile the Government's economic growth policies have been laughable --- like the cycleway to nowhere or mining national parks --- or non-existent such as the complete vacuum of economic development policies in key sectors and regions.

"Like a possum caught in the headlights National's monetary policy has been frozen in outdated free market orthodoxy, while all around us global financial markets are in turmoil and local manufacturers wither on the vine facing a rapidly rising Kiwi dollar," David Cunliffe said.

"Little wonder business tax receipts have plummeted 22.4 percent below latest forecasts and confidence is low, despite a 30 year record high in commodity prices. Little wonder Standard and Poors have concluded National's economic medicine is not working.

"Eighteen months after National trumpeted Standard and Poors’ earlier re-rating, National has squandered its chance, its economic reputation is in tatters and it has no-one to blame but itself," David Cunliffe said.

ENDS

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