29 April 2009

NEW RELEASE

Not just a case of a passing recessionary flu

The New Zealand Institute has today released, 'Not just a case of a passing recessionary flu: The Budget must also address an underlying lack of economic fitness'. This article describes the New Zealand government's fiscal outlook, and proposes principles that should drive New Zealand's fiscal strategy and be reflected in the upcoming 2009 Budget to be released on 28th May.

The article explains that New Zealand is facing the dual problems of the global recession and under-potential economic growth; both a passing economic flu and an underlying lack of economic fitness. Because it must address both of these diagnoses, the 2009 Budget is one of the most challenging policy prescriptions that a New Zealand government has had to write in recent years. The recommended course for the government to take is to seize this fleeting opportunity to springboard New Zealand out of the recession by using the Budget to: (1) invest in critical areas needed to boost economic growth; (2) prevent a debt explosion by putting on the table measures on both the spending and tax sides of the budget ledger; and (3) address structural imbalances that have led to chronic underinvestment in productive assets. This medicine may be difficult to prescribe and hard to take, but the alternative - which is for the Budget to focus exclusively on controlling the costs of existing policies without addressing the need for bold and transformative action on growth - will not put the patient in good long-term health.

The article recommends a number of specific budget proposals that would help achieve growth, deficit control, and address structural imbalances, to ultimately ensure a strong and better future for New Zealand.

The article is the fourth and final in a series of articles about the global financial and economic crisis. This programme of work examined the global financial and economic crisis, the implications for New Zealand, and most importantly, the nature of the appropriate policy response by New Zealand to navigate the short-term challenges as well as position New Zealand for the longer-term. The other articles in this series can be found on the Institute's website, click here to read these articles.

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