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New Zealand needs to save more - English

Contributor:
Fuseworks Media
Fuseworks Media

The Government's cash deficit is heading towards a record $15.6 billion and there is no room from complacency, Finance Minister Bill English says.

The Government's financial statements for the six months to December 31 were released today, showing residual cash deficit at $13.2b was $555m higher than forecast, mainly due to payments made in late December which had not been anticipated to happen until January.

"This Government has borrowed heavily to support the economy and jobs during the recession and the early stages of recovery, but that kind of borrowing cannot continue indefinitely," Mr English said.

"New Zealand as a whole needs to save more, spend less and reduce its heavy reliance on foreign debt -- and the Government is a crucial playing in this.

"By playing its part in lifting national savings, this Government will help to keep interest rates low and build faster, ongoing economic growth."

The operating balance deficit, inclusive of gains and losses, was $1.3b, significantly less than the $4.9b deficit forecast.

At December 31, gross debt was $62.1b -- 32.5 percent of GDP -- $1.8b higher than forecast across a number of debt instruments.

Net debt of $39.5b -- 20.7 percent of GDP -- was close to forecast.

Core Crown tax revenue was 0.7 percent above forecast at $25 billion, Treasury said.

Source deductions (PAYE) were $271 million or 2.6 percent higher than forecast, and GST revenue was $125 million or 1.9 percent lower than forecast.

The figures are compared to the 2010 Half Year Economic and Fiscal Update published in December.

Council of Trade Unions economist Bill Rosenberg said the latest financial statements showed the Government does not need to sell assets, and could spend more to prevent unemployment rising again.

"Net debt is on the expected track at 20.7 percent of GDP," Mr Rosenberg said. "The operating deficit before gains and losses was also on track while the operating deficit at $1.3 billion was $3.6 billion less than forecast due to good performance of the public investment funds and changes in ACC's discount rate."

Mr Rosenberg said unemployment rate is 6.8 percent and it was unlikely to fall quickly without continued and more focused government action.

"Employment and the Government's accounts would be in better shape if rather than permanent tax cuts favouring high income earners, the Government had put in place more infrastructure spending, more programmes like housing insulation, more direct assistance to people out of work, and more assistance targeted towards low and middle income earners," he said.

"Mr English's statement that these government spending programmes have helped prevent unemployment rise even higher are an acknowledgement that this kind of expenditure needs to continue or we risk further rises in unemployment."

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