Government Actions Drive up Deficit

The National-led Government’s policies will place more upward pressure on New Zealand’s current account deficit the Green Party warned after the Government signalled a rise in the deficit to 9% of Gross Domestic Product (GDP).

Finance Minister Bill English told the House today that the balance of payments deficit – set to be officially announced on Thursday – will be "in the order of 9 percent of GDP, one of the worst in the OECD." A jump from 8.6 to 9% represents a rise of approximately billion dollars in the last three months.

“National is making a bad situation worse,” Green Party Co-Leader Russel Norman said today. “The Government wants more roads which will mean more oil imports which will mean a bigger deficit.

“We have a choice – we could invest in public transport, walking and cycling and sustainable biofuels – but the John Key government is stuck on roads which is an oil-dependent blueprint from the 1950s. We spent more than $8 billion importing oil last year. Oil prices have now dropped but they will go up again."

New Zealand’s seasonally adjusted deficit was $4,079 million in the September 2008 quarter. The figure represented 8.6 percent of GDP, up from 8.4 percent for the year ended June 2008. The increase was “mainly due to higher prices for petroleum” according to the Government Statistician.

Dr Norman noted that the Government’s plans to loosen restrictions on overseas investments would also add to the deficit through the overseas purchase of New Zealand assets: “The repatriation of profits to overseas owners is a major component of the investment income deficit.”

Added to this was National’s cuts to KiwiSaver which would mean that New Zealanders saved less: “Our low savings rate means we pay billions to borrow money from overseas, further adding to our investment income deficit.”

On the positive side of the ledger, the Reserve Bank’s recent Monetary Policy Statement projected that tourism will help New Zealand reduce its deficit, Dr Norman noted. But the Government’s inaction on issues such as greenhouse gas emissions and clean water put that income at risk as well: “they threaten our clean green reputation upon which tourism is built.”

For the year ended September 2008, New Zealand received $7,164 million in tourism-related revenue put at risk by the National-led Government’s anti-environmental stance.

The balance of payments figures for the December 2008 quarter are to be released this Thursday (26th March 2009) at 10.45am. http://www.stats.govt.nz/default.htm