MEDIA RELEASE

6 August 1999

Has Labour abandoned debt repayment?

Treasurer Bill English said today Labour now needed to explain whether it had abandoned debt repayment as a key plank of economic policy.

"Dr Cullen's explanation for how he will pay for his superannuation fund raises some questions.

"Firstly, he is saying that money will go into the fund from surpluses. Yet there are no surpluses projected which would be big enough for a $1.5 billion a year super fund. This would mean that he is trying to get credit for a policy that he knows he can't fund.

"If in fact he plans to use every dollar of the surpluses currently projected for his super fund, then he must intend to stop repaying debt, because that is what the small surpluses are currently earmarked for.

"Debt has been more than halved this decade from a peak of 52% in 1991/92 to 22.5% this year. We want to bring that down futher because lower debt reduces the country's vulnerability to international shocks. It looks like Dr Cullen is saying that a key plank of Labour's economic policy is abandoning debt repayment.

"The figures I have released on the cost of Labour's spending promises don't include items like reversing the ACC changes, research and development plans, or having no user charges for border protection. Dr Cullen's figures don't allow for these policies or more to come.

"Dr Cullen has worked hard to convince people he would be a reasonable Treasurer, because he knows the biggest hurdle Labour faces is his colleagues' natural instincts to say anything that sounds publicly appealing.

"Just this week Helen Clark made some comments about changing the Reserve Bank's Policy Targets Agreement, which caused immediate concern and uncertainty in the financial markets.

"Dr Cullen had to step in and play down her comments, but not before the damage was done. This sort of difference of opinion does nothing towards building confidence in Labour's economic strategy.

"The line he is walking will only get harder to hold as the pressure goes on Labour to promise more spending and pull back on the sound economic strategy that will underwrite this country's growth over the next few years," said Mr English.

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