Worsening outlook due to poor economic management

John Key’s Government can take most of the responsibility for the worsening fiscal position and quite a lot of responsibility for the worsening economic position, Green Party Co-Leader Dr Russel Norman said today.

Dr Norman was responding to the release of the Half Year Economic and Fiscal Update from Treasury that showed an underlying fragility to New Zealand’s economic recovery.

“The worsening outlook for the Government’s budget is a result of some poor decisions on both the revenue and spending side,” said Dr Norman.

“On the revenue side, the Government’s tax cuts directed towards upper-income earners and the lack of a capital gains tax (excluding the family home) has led to a revenue shortfall.

“On the spending side, the Government’s poor quality spending on uneconomic new motorways and ETS subsidies for polluters has also had a negative impact on the books.

“We are literally now borrowing money to pay for tax cuts for the well-off and motorway projects with negative economic returns.

Dr Norman also questioned the quality of the Government’s economic stimulus measures that have failed to revive a fragile economy.

“Tax cuts directed towards upper-income earners are one of the poorest ways to stimulate a failing economy. Increasing aid to the unemployed has a stimulus impact two-to-three times greater than nearly any other measure the Government could have chosen,” said Dr Norman.

“And it would have worked to mitigate the worst impacts of the recession on those most vulnerable to it.

“The Government’s approach to economic management during one of the most turbulent periods of recent history has failed all but the wealthiest of us.

“A smarter way to manage the uncertainty would have been to use the crisis as an opportunity to transition the economy onto a more sustainable and resilient footing. Instead we have an old economy more reliant on cheap oil to run, paying polluters subsidies to emit carbon, and borrowing to fund tax cuts that have failed to stimulate the economy.