John Key says the severity of the international downturn has exposed the economy’s weaknesses more quickly than anyone expected. The choices facing NZ have become “more stark.” NZ’s economic recovery must be built on improved productivity and a better environment for investment in jobs and growth. Key argues the decade of deficits outlined in the Prefu can be eliminated if NZ gets back to faster growth than Treasury forecast. National will not only “rigorously” review Govt spending, but will lift productivity across the public sector by ensuring a strong focus on provision of services.

It will cancel proposed new spending on the Ministry of Foreign Affairs and Trade, on which $350m of operating funding has so far been appropriated over the next four years. When this spending was first proposed, Treasury said there was no good case for it. Key says the Labour coalition’s subsequent confirmation of this spending was clearly in the nature of a political trophy for the former Minister. In refusing to commit to this additional funding, National says it will save $265m over 2009/10 to 2012/13. The savings will be used to reduce the operating deficit. National will also drop Labour’s Fast Forward fund, for which the Govt is borrowing $700m.

On National’s planned commitment to increasing infrastructure spending, Key says in light of the marked increase in debt signalled in the Prefu, higher spending will be phased-in, to avoid putting additional strain on the Crown’s fiscal position. Key insists National is committed to pegging back persistent operating deficits Labour has generated. The operating balance will be healthier under National than under Labour in every year, apart from 2009/10. There is very little difference in gross-debt-to-GDP ratio between National and Labour, with it averaging 26.9% under National compared with 26.8% under Labour.

 Copyright © Trans Tasman Media Ltd