25 May 2005

Rich from Brash

Finance Minister Michael Cullen said today that the government’s performance as a fiscal manager was second to none and had routinely won praise from such international commentators as the OECD and the International Monetary Fund.

“In its latest report on New Zealand, issued earlier this month, the IMF stated that our fiscal position was very strong and that the prudence and discipline the government had been exercising should be maintained.

“Similarly, the OECD has this week reinforced the government’s message that a further fiscal stimulus on top of what is already planned would put the projected soft economic landing at risk and would need to be offset by higher interest rates.

“So much for Don Brash’s dismissal today of my statements that their proposed tax cuts would be inflationary. They might not want to believe it but the evidence is incontrovertible,” Dr Cullen said.

“Our fiscal record speaks for itself. We inherited a gross debt to GDP ratio of 33.7 per cent. It now sits at just under 25 per cent and is projected to reduce to just over 20 per cent within the next two years.

“The Crown is also projected to reach a net positive financial asset position in 2006-07 for the first time in New Zealand’s history. That is an achievement of which any government would be proud and positions us better than most other countries to deal with the ageing population.

“And National is misleading when on the issue of government spending, it quotes total Crown expenditure as this includes Air New Zealand, Kiwi Bank and all the Crown owned agencies. The relevant measure is core Crown spending which has in fact reduced as a proportion of GDP since 1999,” Dr Cullen said.

He also said Dr Brash’s criticisms of the government’s economic management were rich given that, according to international expert Lars Svensson, the Reserve Banks’ over-zealous tightening of monetary policy in the wake of the Asian crisis threw the economy into a tailspin.

ENDS

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