15 May 2013

IMF confirms National’s failure to rebalance economy

The International Monetary Fund (IMF) has confirmed today that the economy remains seriously out of balance, with low household savings and high debt levels.

The IMF states: “New Zealand’s large net liabilities reflect historically low household savings rates and a structural savings-investment imbalance. They agreed that the causes of low household savings will need to be addressed to reduce pressure on the exchange rate and limit current account deficits.”

“The IMF has today confirmed that the wider New Zealand economy is seriously out of balance,” said Green Party Co-leader Dr Russel Norman.

“The National Government has failed to rebalance our economy as promised.

“National has focused its effort on trying to repair the damage done to the Government’s accounts by its $2 billion a year tax cuts to upper income earners and trying to get back into black with a margin of error surplus. National has ignored addressing systematic imbalances in the economy as a whole.

“At the start of the last economic cycle in 1998, average household debt was around 93% of disposable income. This time around, household debt is starting out at 153% of income.

“This is a debt time bomb which the Government can’t solve with its planned razor thin surplus.

“Households aren’t savings because National has failed to create jobs and lift wages, reduced KiwiSaver incentives, and has failed to address the overvalued kiwi dollar.

“Bill English made rebalancing the economy his primary goal in earlier budgets. Now he doesn’t talk about rebalancing at all.”

The IMF has endorsed two of the three Green Party’s solutions to address rebalancing.

“The IMF support a capital gains tax and has welcomed the Reserve Bank’s intention to use macroprudential tools to address the housing bubble,” Dr Norman said.

“The Green Party will also strengthen Kiwibank, allowing it to retain its earnings to grow faster – adding a further capital injection, if necessary. We want to help build Kiwibank into a sophisticated retail and commercial bank, with the scale needed to lend to productive enterprise.

“Under Bill English’s economic mismanagement, the productive economy has languished. This will not be a strong, sustainable recovery. This will not be a jobs-rich economic recovery.”

Link to IMF note on New Zealand:

http://www.imf.org/external/np/sec/pn/2013/pn1351.htm

Link to the BERL report, Rebalancing the New Zealand Macroeconomic Environment – Progress Since 2008:

http://www.greens.org.nz/sites/default/files/berl_report_rebalancing_the_macroeconomy.pdf

Parliamentary Library graph on Bill English’s frequency of use of the term rebalancing:

http://www.greens.org.nz/sites/default/files/bill_english_on_rebalancing.pdf
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