NZ Economy: Early Signs Economy Is Shifting Its Focus
April 15th, 2010
In the GDP figures for December, the Govt sees some early signs of the shift in the NZ economy it wants. A shift it believes can be accelerated by tax changes in the budget. Housing and consumption have not taken off as expected before Christmas, Govt administration has shrunk for the first time since 1999, while the manufacturing and exporting sectors are looking stronger. The IMF team which has just completed its annual check-up of the NZ economy supports the kind of tax reform shifting more of the tax burden from income to consumption.
The IMF’s Asia and Pacific division chief Ray Brooks says they were “certainly encouraged” by the Govt’s commitment in containing the growth of net public debt to 30% of GDP by 2016 and bringing it down over the longer run to 20%. The IMF team contends the Govt should cut spending by better targeting Working for Families, student loans and free GDP visits. But John Key says National has pledged not to change those entitlements: “it’s not my intention to break those promises.” What the Govt has already done however is to squeeze down the rate of increase in Govt spending. Programmes like early childhood spending rose under the previous Govt, for example, from $400m a year to $1.1bn. Continuing increases of those proportions would be ruinous.
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Duncan Cotterill