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Key’s debt complacency concerning

8 August 2011

Key’s debt complacency concerning

New Zealand can’t afford to be complacent about our current debt situation, Green Party Co-leader Dr Russel Norman said today.

“Under John Key’s economic management, New Zealand’s net core Crown debt has gone from $3.4 billion late in 2008 to $39.6 billion in May 2011,” said Dr Norman.

“And the Crown debt situation is set to get a lot worse before it gets any better. Treasury forecasts net core Crown debt to reach a massive $73 billion by 2015.
“We can’t let the financial uncertainty abroad distract us from necessary work we still need to do here at home.

“As a small open economy, we need to manage our debt even more prudently than our OECD peers. Two of the three credit rating agencies have New Zealand on a negative debt outlook and three National Budgets have failed to improve the situation.

“The Government’s tax cuts for those on higher incomes, the reduction of incentives to invest in Kiwisaver, and the failure to redress the tax bias for housing speculation, have stalled the transition to a stronger, savings-based productive economy.

“The Government’s decision to fund the rebuild of Christchurch from debt rather than a small levy on income is yet another sign of their unwillingness to take a more responsible approach to debt and economic management.

“The only saving grace about New Zealand’s debt situation has been the deleveraging we’ve seen in the private sector since early last year.”

The Green Party would introduce a suite of measures to rebalance our economy, reducing our reliance on debt-fuelled consumption and housing speculation while incentivising a move to a cleaner, greener productive economy.

“A capital gains tax (excluding the family home) is a critical component of rebalancing our economy,” said Dr Norman.

“A comprehensive tax on capital doesn’t even have to raise any additional revenue to be effective. The resulting flow of money from housing into manufacturing and the export sector would lift real jobs and productivity.

“This is an extraordinarily pragmatic action to lift our long-term economic performance. Beyond this the additional revenue raised in the medium term would be substantial and it could be used to pay down government debt faster.

“The Government is also considering further borrowing to fund its $20 billion risky and rapid expansion of state highways. This is not the optimal time to be borrowing to build infrastructure that’s vulnerable to high oil and carbon prices.

“We have the opportunity to meet both the economic and environmental challenges of our time with astute economic management. John Key’s Government is showing it doesn’t have the smarts to reduce debt sooner and transition our economy to a more sustainable and resilient footing,” Dr Norman said.

ENDS

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