Magazine article New Zealand Management

ECONOMICS: A Tale of Two Messages

Magazine article New Zealand Management

ECONOMICS: A Tale of Two Messages

Article excerpt

Byline: Bob Edlin

The Key Government hasnCOt disabused those of us who imagined it will use fiscal policy to stimulate the economy and help see us through a deepening recession. It enthuses publicly about a $9 billion, three-year C[pounds sterling]rolling maulC[yen] of measures. Its own contribution to this stimulation, however, largely comprises tax cuts rather than increased government spending or investment. For the rest of the programme, there are regulatory measures (to make it easier for businesses to do business) and an earlier timetabling of the Clark governmentCOs infrastructural development plans.

It doesnCOt mind us thinking governments can do plenty, in recessionary times, and that it will do plenty.

On 10 February, Key told Parliament C[pounds sterling]the New Zealand public is rightfully looking towards our Government to ensure they get through this economic recessionC[yen]. His Government had taken several steps to provide C[pounds sterling]much stimulus and support to those in great needC[yen], he said. This included introducing legislation to ensure there were tax reductions from 1 April this year and the ReStart package to ensure the Government can provide extra support to those hard hit by redundancy.

He also mentioned the first phase of the GovernmentCOs reforms to simplify and streamline the Resource Management Act and a small-business relief package, aimed at helping to lighten the load of small and medium enterprises. He spoke of plans to bring forward a number of public infrastructure projects and start several new ones. Oh, and donCOt forget the Job Summit, to bring together the private sector, local government, non-governmental organisations, and public sector participants to discuss ideas to keep people in employment.

National MP Nathan Guy asked a patsy question about an OECD report, enabling Key to favourably compare the level of fiscal stimulus in New Zealand with that in other OECD countries. C[pounds sterling]Yes,C[yen] he responded, C[pounds sterling]I have seen a report on fiscal stimulus across the period 2007-10 in all OECD countries. That report shows New Zealand having the third-highest fiscal stimulus in the OECD.C[yen]

That level of fiscal stimulus was appropriate to the circumstances facing New Zealand. But he had to be careful. Over-doing the fiscal stimulus would result in our running very large deficits and building up levels of government debt C[pounds sterling]that would be a huge burden not just on this generation but on future generationsC[yen].

KeyCOs concerns about rising public debt are important to his policy approach. …

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