Worries For Govt Despite Better “Feel-Good Factor”
August 13th, 2009
Economists say NZ is moving towards recovery and a better “feel-good factor” has developed. But the Govt is worried by unemployment rising faster than expected. It may continue rising well into next year. The Govt sees the economy as lopsided, with almost no net jobs created in the tradeables sector for the past 10 years. And the red ink in the Govt accounts is growing. ACC liabilities have blown out another $1.2bn. Almost beneath the radar Cabinet is burrowing deep into policy issues aimed at setting NZ on the road to sustained recovery. Some of those issues were glimpsed in a range of decisions this week (a 2020 target of 10% to 20% reduction in carbon emissions, moves to rationalise the electricity market, a National Infrastructure Plan).
A major report on the health sector by former Treasury secretary Dr Murray Horn will give Health Minister Tony Ryall new ideas on how to get better value-for-money. Besides rising unemployment the Govt is worried another “bubble” may develop. It cannot risk another bout of debt-fuelled consumption. The Govt faces hard decisions on how to end wholesale funding guarantees for banking institutions. And re-balancing the economy in favour of the export sector is blunted by the strength of the stubborn dollar. Yet the “feel-good factor” suggests many NZers believe the worst is over and everything will soon be back to “normal.” The Govt knows differently.
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Duncan Cotterill