IMF report shows Budget lolly scramble wrong

A sobering IMF report on the New Zealand economy issued this week raises serious questions about National's profligate $15b tax lolly scramble.

The report says "NZ stands out as having one of the lowest savings rates and one of the largest net foreign liabilities positions of any advanced country. It forecasts NZ's current account deficit blowing out to over 8% of GDP following the Budget.

"The IMF calls for rebalancing the economy towards increased savings and exports, which is exactly what Labour has been saying," Labour Finance spokesperson David Cunliffe said today.

The report recommends shifting government expenditure from consumption to investment and further consolidating fiscal settings in order to ease interest rates.

"That is precisely the opposite of what will result from National's $15b tax giveaway, which will add $1.1 billion extra to Crown Debt over four years, and much more debt beyond that, while achieving less than a pitiful 1% extra GDP growth over 7 years and almost no impact on jobs," David Cunliffe said.

"By spending up large on irresponsible and unaffordable tax cuts, National has made New Zealand's fiscal outlook bleaker and future choices more difficult.

"When one third of the lolly scramble went to just five percent of income earners, at a time the government is cutting home help for the elderly and early childhood education for our kids, these priorities are badly wrong.”

Labour will tomorrow release analysis that shows a cumulative $9b additional fiscal deficit arising over the net decade.

"This is an irresponsible, even frightening outcome. No wonder National, having beggared the books, is already talking up privatisation as a desperate way to fill its own ever-deeper hole,” David Cunliffe said.

The IMF report can be found at

http://www.imf.org/external/pubs/ft/wp/2010/wp10128.pdf