Government should review options not just target date

CTU Media Release

19 June 2012

Government should review options not just target date

With the government conceding that their surplus target could well stretch out another “year or two” and asking Treasury for an interim review of the economy, it is also time for a rethink of their economic policy, says CTU Economist Bill Rosenberg.

“It is good that the Government is finally moving away from its inflexible target for reaching Budget surplus next year. This arbitrary goal is contributing to the ongoing stagnation in the economy and has been used as an excuse and explanation for two consecutive ‘zero budgets’ at a time when we needed investment in jobs and our economy.”

“It is welcome news that the Government will no longer be rigidly sticking to the unattainable and unnecessary goal of getting back to surplus in such a short time. Government expenditure is becoming more and more necessary to get the economy moving again – people are increasing mortgage repayments rather than spending, the Christchurch reconstruction is looking to be a propeller rather than jet boost to the economy, and most indications, including commodity prices, are looking negative overseas.”

Bill Rosenberg says “without the fixed target of getting back to surplus, the government has room to move with its own low levels of debt. It could be spending in areas that relieve continuing high unemployment, hardship among increasing numbers of families, and increasing signs of underfunding of public services such as the urgent needs in Christchurch, housing, community health services, and tertiary education and training, while more actively building New Zealand’s export capacity and cutting our reliance on overseas capital.”

“An easing of the surplus target will allow for a much needed boost to the economy. Expanding funding to help people out of work retrain and find jobs is an immediate need. An investment fund could provide capital for potential exporters. Building low cost housing and putting new money into housing insulation would provide jobs, get the construction industry up and running, and take the edge off looming house price bubbles in Christchurch and Auckland. Education and industry training build capacity for the future.”

“It doesn’t all need to be paid for from increasing deficits. An earthquake levy with higher rates for high incomes, a new income tax rate on high incomes, and a capital gains tax are all options that would increase revenue without draining money from those most needing it and most likely to spend it to generate jobs,” said Bill Rosenberg.

ENDS

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