Data released this week shows that, while New Zealand is not immune to the economic impacts of the global pandemic, our strong health response has meant we’ve been able to get our economy going faster than many other countries.
This week, Treasury released its Pre-election economic and fiscal update, which reflects the impact of COVID-19 on our economy.
The numbers show New Zealand’s economy is doing better than forecast, with lower unemployment and higher growth expected.
What the numbers show
We’ve always said a strong health response was the best economic response, and the latest Treasury figures show that our approach is working. Unemployment is forecast to be lower than expected, and our economy is forecast to grow faster than many other countries’.
Treasury now forecasts that unemployment will peak at 7.8%, down from the 9.8% forecast in the Budget. The New Zealand economy is forecast to grow by an average of 4.2% across 2021 and 2022, compared to Australia at 3.6% and the United States at 3.5%.
Our path to recovery
Thanks to our careful economic management prior to COVID-19, we have a strong base and a plan to launch our recovery from. There will be challenges ahead, but we’re now in a stronger position than many other countries.
“COVID-19 is hurting economies around the world, but because New Zealand went into this with low debt and a growing economy, we will come out better than other advanced countries,” Grant Robertson said.
“Our strong starting position that means even at its peak of around 56%, New Zealand’s net debt will be considerably lower than other economies around the world – advanced economies went into COVID-19 with net debt averaging about 80% of GDP.”
Keeping a lid on debt
We are committed to keeping on top of debt and managing the books responsibly, while also protecting vital services like health and education. Labour believes in putting the health and wellbeing of New Zealanders at the heart of everything we do and, with an ongoing global pandemic, that approach is more important now than ever.
We’ve always known that the investments we’re making now to grow the economy will need to be funded by long-term borrowing. And while we must be mindful of the impact borrowing will have on future generations, it’s important that we do all we can to protect New Zealanders from the immediate impacts of COVID-19.
We will continue to grow the economy as we support people through the pandemic, so we can pay down debt over time. We will also implement a new individual top tax rate of 39% on income earned over $180,000. This means the top 2% of earners in New Zealand will contribute a little more to help support our country's long-term COVID recovery. For 98% of New Zealanders – those earning under $180,000 – there will be no income tax changes.
Under our economic plan, Government debt at its peak will still be significantly lower than many other countries had before COVID-19. Forecasts show our net debt will reach around 53% of GDP, while the average for advanced economies around the world, before COVID-19 hit, was 80% of GDP.
You can read more about our plan to keep debt under control while supporting people through COVID-19 here.
Our plan to keep New Zealand moving
We will continue to manage the economy responsibly. And right now, being responsible means investing in our people, businesses and communities during these challenging times, so we can keep our economy moving as we rebuild New Zealand together.
There are challenges ahead, but we have a five-point plan to grow the economy, support businesses and seize the opportunities created by our world-leading COVID response.
Our plan is focused on supporting New Zealanders through the pandemic while continuing our economic recovery - and it’s already in motion. Now's not the time to put on the brakes, so let's stick together and let's keep moving.
You can read more about our five point economic recovery plan here.
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