Decade of deficits

Treasury is forecasting more than a decade of deficits:

With deficits projected out to 2033/34, there needs to be urgent action from all political parties on addressing the national debt, says the New Zealand Taxpayers’ Union. 

Taxpayers’ Union Campaigns Manager Louis Houlbrooke says “After many years of prudent fiscal management from National and Labour, it Treasury is now projecting 15 years of deficits in a row. As a result, net debt will be $31 billion higher – or $17,000 a household – in 2033/34 compared to the Budget 2020 projection. The Government needs to give us a credible path back to surplus rather than leaving taxpayers on the hook for a never-ending accumulation of debt.”

“The major reason for the more than a decade of deficits ahead is Treasury’s belief that our economic recovery from Covid-19 will be more anaemic than previously expected. The message is clear: our recent track-record of weak economic growth isn’t just hurting incomes and entrepreneurship; it’s going to have a serious impact on our public debt.

“The solution to the forecast decade of deficits is to cut wasteful spending, end regulatory taxes on business which stifle growth and employment, and deliver modest tax relief to households and employers to get the economy growing again.” 

It’s 12 years since Treasury last forecast a decade of deficits.

That was when a Labour-led government propped up by New Zealand First was on its last legs. It was also before the global financial crisis hit.

National came to power and in spite of the GFC and Canterbury earthquakes, returned to surplus in less than 10 years.

Who will you trust to turn the Treasury forecast round this time – the government that squandered the surplus and had the country back in deficit before Covid-19 hit, or a National-led government that understands that the quality of spending is far more important than the quantity?

Today’s Pre-election Economic and Fiscal Update forecasts a longer and more painful economic crisis than earlier forecast and requires a serious growth plan to get New Zealand back on track, National Party Leader Judith Collins and Finance spokesperson Paul Goldsmith say.

“Our economy is forecast to have shrunk by 16 per cent in the June quarter, and we will be taking on even more debt, an extra $200 billion. Every dollar and cent of this will have to be paid back by our children and grandchildren,” Ms Collins says.

“Unemployment will be substantially worse in 2022 and 2023. Treasury predicts 100,000 more New Zealanders will lose their jobs in the next two years.

That’s more than 10,000 more than the total population of Palmerston North.

“The Minister of Finance shouldn’t try to sugar coat these figures. He has taken a rose-tinted glasses view at a dreadful picture that cannot be described as anything other than catastrophic. Any short-term improvement on the Budget forecasts is far outweighed by the worsening picture past 2021.

“The contrast between Treasury’s estimate of more than 16 per cent contraction in our economy in the June quarter compared with 7 per cent in Australia shows he should be careful about making comparisons,” Ms Collins says.

“Grant Robertson’s only plan is higher taxes, and no country has ever taxed its way out of a recession, and this a huge one,” Mr Goldsmith says.

“Treasury is forecasting that under Labour New Zealand will be in deficit every year for at least the next 15 years. Grant Robertson and his Government have no plan to get New Zealand back into surplus. Ever.

“New Zealanders have a choice for our economic recovery: more government programmes, welfare and costs for business under Labour or lower taxes, more business investment and quality infrastructure under National.

“National has a comprehensive plan to secure our border and prevent New Zealand from yo-yoing in and out of lockdown. Effective border management, coupled with common sense and pragmatism around the rules, is an important aspect to help our economy can recover.

“We will do everything we can to make it easier for businesses to hire – 90 day trials, flexible employment laws, low taxes and innovative policies like JobStart and BusinessStart.

“Our economic plan of job friendly policies and investment in quality infrastructure will grow our economy, give businesses the confidence to grow and restore household incomes for New Zealanders,” Mr Goldsmith says.

“National will release our fiscal plan soon which will carefully balance the need to inject stimulus, increase investment in core public services and restore Government debt back to prudent levels,” Ms Collins says.

We couldn’t afford the current government before Covid-19 hit, we certainly can’t afford another three years of mismanagement.

 

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