Hon Bill English
Minister of Finance

15 December 2009 Media Statement

Government’s focus on jobs, higher growth

The Government’s firm focus in 2010 will be achieving higher economic growth and giving businesses the confidence to invest and create jobs, Finance Minister Bill English says.

Responsible management of the Government’s finances will also be essential, with another six years of forecast Budget deficits.

“Growth matters because it creates jobs, increases incomes and improves the living standards of New Zealand families,” he said today in issuing the Half-Year Economic and Fiscal Update and 2010 Budget Policy Statement.

Updated Treasury forecasts show that both economic growth and the fiscal outlook are a little better than forecast in the Budget in May.

“This reflects the fact that the global economy has stabilised and the success of significant Government initiatives in the past year to fight the recession.

“However, that does not mean that all of the problems of the recession have passed – risks remain that growth could weaken again,” Mr English says

“Unemployment is forecast to peak sooner and lower than previously predicted – 7 per cent in early 2010 as opposed to 8 per cent in the second half of 2010. However, it is likely to remain at elevated levels throughout 2010, even as the economy improves. So the year ahead will remain difficult for many New Zealanders.”

Mr English says the Government’s fiscal position also remains challenging.

“Budget 2009 stopped the growth of low-value Government spending and provided a credible programme to contain debt. Even so, the forecast operating deficit for 2010/11 is $6.7 billion and the Government’s accounts are not expected to return to surplus until 2016.

“This is despite the forecasts assuming long-term spending restraint and an upwards creep in average tax rates caused by increasing numbers of taxpayers entering the top tax brackets. There is little room for slippage.”

The Government has a significant economic programme, which has already helped New Zealand come through the recession in better shape than many other countries.

The economic programme includes:

• Investment in productive infrastructure
• Removing red tape and improving regulation
• Supporting business innovation and trade
• Improving education and lifting skills
• Lifting productivity and improving services in the public sector
• Strengthening the tax system

“We are now building on that programme to ensure New Zealand achieves a step-change in its economic performance,” Mr English says.

“Budget 2010 will set out the next steps of the Government’s growth strategy while continuing the emphasis on sound public finances.”

SUMMARY OF ECONOMIC AND FISCAL FORECASTS

ENDS

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