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GDP release a wakeup call

“Today’s Q2 GDP release will be a helpful reminder that outside the Government’s tunnel vision approach to COVID, the troika of debt, inflation, and uncertainty are killing business,” says ACT Leader and Finance spokesperson David Seymour.

“The figure will likely show reasonable growth was achieved from April to June this year, but it might as well have happened in another decade. Today’s reality is different.

“Treasury Secretary Caralee McLiesh told the real story. Before the latest lockdown, New Zealand had already had the second largest fiscal stimulus

“New debt taken on over the COVID recovery period is forecast at $140 billion. That means borrowing $28,000 for every single New Zealander, or $140,000 for a family of five.

“Today’s figures need to be seen in the context of wartime levels of borrowing by the Government. They believe interest rates will be low forever, but if they’re wrong it’s the next generation that will pay.

“The Government is taking on an additional $140 billion on debt without increasing the productive capacity of the economy. Debt can be good if it funds productive assets -if it will pay itself off. Unfortunately, this debt has been a blow out, on money we’ll never see again.

“GDP has also been propped up by stupendous money printing. You can’t print $100 billion and expect it to have no effect. It is having an effect, and it is house price and consumer goods inflation.

“Treasury reports that in the year to June, house prices were up 30.7 percent. The impacts on equity in New Zealand are stupendous, as a generation sees their pathway to a secure future rip roaring away.

“Meanwhile the price of fish is up, along with everything else. A piece of battered fish is up 5.3 per cent year on year, while all consumer goods are up 3.3. per cent, exceeding the Reserve Bank’s 1-3 percent target.

“Debt and inflation are nothing compared with the problems that uncertainty brings, and this is the Government’s real trouble. For eighteen months the Government had the world’s longest nap, vaguely aware of Delta but doing nothing to prepare for it.

“Today we have the same rules, the same treatments, the same contact tracing, and the same strategy as last year. What has changed is that the strategy is no longer sustainable.

“The Government more than anything else needs to give certainty about what happens next. It needs to answer:

What does it mean for the vaccine roll out to be complete?
What is the Government doing to address shortcomings in its response, so that it can maintain elimination without lockdowns?
At that point, what will be the new criteria for using lockdowns?
“If the Government cannot provide certainty, then the troika of debt, inflation, and uncertainty will ensure this is the last good GDP figure for a long time.”

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