CTU media release
15 December 2009

Government action needed to avoid jobless growth

Though the Minister of Finance says we have “been through the worst”, the Government’s Half Year Economic and Fiscal Update forecasts unemployment rising to 7 percent in the next 3 months, falling only marginally (to 6.9 percent) in 2011 and still at 6.0 percent in 2012, said CTU Economist and Policy Director Bill Rosenberg. NZIER’s just-released consensus forecasts are more pessimistic, forecasting unemployment sticking at 7.0 percent in 2011 and 6.3 percent in 2012.

The Update shows improving outlook for both growth in the economy and government finances, though still with some risks.

“The forecast is therefore for “jobless growth”: not enough jobs being created for people entering the labour force such as from education, and to get unemployed people back into work,” said Rosenberg.

‘The Government should be using its greater room for movement to put more money into creating jobs and actively helping those who become unemployed.

“It is not good enough for Mr English to say that only the private sector can create jobs. We hope they do, but there are enough risks on the horizon, especially for exporters, that it cannot be counted on.

“Spending on infrastructure, new housing and green development are some ways it could help. It should also be putting more resources into active help for people out of work to help them get new skills if they need them, and to search for work.

“Investment in skills development and encouraging more people into education are obvious areas for greater government priority.

“Mr English made it clear that there is not a real threat from the Credit Rating Agencies such as Fitch and Standard and Poor’s. He confessed that they will focus on countries ‘which really have a problem’ rather than New Zealand.

“New Zealand’s net debt is now forecast to peak at just above 30 percent in 2016. Debt in the U.K. is already at 59 percent this year, and forecasts for many countries in the OECD are for levels well over 100 percent of GDP.

“Government debt is not the problem. Private debt still is, with current account deficits forecast to rise to over 7 percent in 2013 and 2014.

“The Government appears to be using the Credit Rating Agencies as a cover for its wish to significantly cut government spending as a proportion of GDP.”

ENDS

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