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Austerity-lite budget risks recession

CTU Media Release

24 May 2012

Austerity-lite budget risks recession

Commenting on today’s Budget, CTU Economist Bill Rosenberg says “today’s Budget may be ‘austerity-lite’ but it’s the same failed logic that is being rejected in Europe. With danger signals in Europe and falling agricultural export prices, the zero budget poses a real risk of sending us back into recession. The forecasts include falling export income in 2012/13."

“We’ve seen high GDP growth forecasts time and again, but they have never actually showed up. Instead we have seen unemployment exceeding forecasts, lasting longer and affecting more people.”

Bill Rosenberg said “the tax changes targeting smokers, school children and the family batch announced today will only raise $289 million in 2012/13, and won’t address the loss of revenue and inequalities caused by the tax changes of 2010 which gave tax cuts to high income earners while hitting low income families with GST hikes.”

"We have too many New Zealanders earning low wages or looking for work. The forecasts show working people getting a falling share of the income in the economy. The government should have been putting money into assisting high value industries that create good jobs and exports, and stimulating growth in job-rich areas. The investment in the Advanced Technology Institute is positive, but the industry we need won’t just grow on its own and needs much more attention," said Bill Rosenberg.

Bill Rosenberg said "you can’t have growth and austerity, it just doesn’t work. With government debt still among the lowest in the OECD, it had room to move with real investment in job creation, economic growth, and looking after those who are most vulnerable."

“This government is still hiding behind the economic crisis and its self imposed timeframe for getting back to surplus to mask that they are making choices that will not help create jobs and economic growth. We do need to be careful about government debt levels, but an inflexible and rushed approach to debt reduction will hurt the economy more than it helps, and cuts in public sector jobs will only increase already high unemployment levels.”

“Despite being one of the least hard hit in the OECD by the 2008-09 global financial crisis, and maintaining one of the lowest government debt levels throughout the period 2004-2012, we are now 12th lowest in the OECD for unemployment whereas in 2004 we were 3rd lowest,” said Bill Rosenberg.

ENDS

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