With Sir Roger Douglas about to unveil his alternative budget, and business lobbyists demanding action on the Govt’s transformatory policies, fresh pressure is mounting on the Govt to start showing its hand on measures it has pledged will lift NZ’s rate of growth. Sir Roger says if he were Finance Minister he would immediately make the first $600 of personal income free of tax, balancing it with a tax on capital levied at a ’small’ rate. Others are calling for bold action to cut back NZ borrowing and lessen pressure on the NZ dollar.

But the Govt is not budging from its own timelines, with Finance Minister Bill English saying the focus of Budget 2010 is a “step-change that permanently lifts NZ’s economic performance.” John Key cites the Herald-DigiPoll survey, showing 80% of respondents rate the Govt’s performance in dealing with the recession as good, very good or excellent, as an endorsement of Bill English and the Govt’s economic leadership. Key says “we have a plan and we are implementing it.”

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While the economy is moving into recovery, the Govt senses consumer and business confidence remains fragile, and the kind of shocks implicit in radical reform could send the economy into another downward spiral. At some time the combined stimulus of monetary policy (from low interest rates) and fiscal policy (from tax cuts and big spending programmes) has to be moderated. It’s clear however the Govt has broad public support for its economic policy which has prevented unemployment rising to 8% as predicted. Now the task is to ensure the recovery is not a jobless one.

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