17 December 2013

Government must focus on growing social deficit

“The Government must move away from a narrow focus on fiscal deficit reduction to the social deficits that have not been addressed”, says CTU Economist Bill Rosenberg.

“The Budget Policy Statement released today shows little change in direction, and does not provide any light for struggling families this Christmas. The Government needs to step up and change its focus to the large and growing social deficit and support those who need it most.”

Rosenberg says “inequality is high and will grow if the benefits of a growing economy are not shared. It shows itself in high levels of child poverty. Wage and salary earners will lose out if the Government pushes through its employment legislation.”

“The forecast growth in the economy is largely driven by a relatively limited number of sources: commodity prices, house building and construction and other activity in the Christchurch rebuild. How will that ‘trickle down’ into more and better jobs and rising wages and salaries? It needs to be much more than a trickle after years of little wage growth.”

“Forecast wage growth after inflation (real wage growth) is slower than forecast productivity increases so wage and salary earners will get a falling share of the income available in the economy.

“Unemployment is forecast to fall only slowly, expected by Treasury to be still at 5.8% in March next year, and above 5% in 2017 – 130,000 people or 5.2%. Employment growth will only slowly reduce the gap that opened up over the last 4 years between employment growth and the increase in the working age population. New Zealand is doing much worse on unemployment than its GDP growth relative to other OECD countries.”

Health and education budgets need more to keep up with rising costs, needs and population, but look like they will grow only slowly.

“Looking to the future, the forecasts for GDP growth are short-lived. Within two to three years the forecasts say economic growth will be back to below the economy’s capacity and similar to low historic levels. Despite it talk, the Government has done nothing to change this but rely on international commodity prices, the rebuild and special deals to businesses big enough to twist its arm. It is not a future that promises well-paid, secure jobs and fairer sharing of the income the economy generates.

“Reducing the deficit is not a plan to fix the problems in society or the economy. What is the Government going to do about these much more important issues?” Rosenberg asks.

ENDS

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