Hon Dr Michael Cullen
Minister of Finance
22 June 2006 Media Statement
Current account deficit underlines fiscal prudence
The wisdom of the government's fiscal strategy has again been underscored by the latest current account figures, Finance
Minister Michael Cullen said today.
The March year current account deficit widened to $14.5 billion or 9.3 per cent of GDP, slightly worse than market
expectations.
"Strong economic growth and higher oil prices have aggravated the goods balance, but there are some hopeful signs with
the trend on goods flattening out. This should improve over the next year as the lower exchange rate boosts export
returns," said Dr Cullen.
"The result shows just how reckless National's multi-billion tax cuts would have been at this stage of the economic
cycle. Further fiscal stimulus would clearly have aggravated the deficit as well as boosting inflation and raising
interest rates.
"Today's result reinforces the government's prudent fiscal strategy of reducing debt, investing in infrastructure and
building up assets in the New Zealand Superannuation Fund. It's why Standard & Poor's recently said we have the balance right, being one of the "best placed" nations in the world to cope with future
challenges.
"However, we need to encourage a stronger savings culture if we are to be less reliant on foreign capital and the
government is endeavouring to do that through initiatives such as KiwiSaver."
ENDS