CTU: Economic outlook and Govt. accounts show need for cooperation on economic strategy

"The economic outlook and the Government accounts are clearly deteriorating. This requires an economic strategy from the Government that can gain support from all sectors of the economy,” Council of Trade Unions Economist Peter Conway said today.

“For instance the OBEGAL (Operating Balance Excluding Gains and Losses) goes from +$5.6 billion in 2008 to -$6.0 billion in 2011. This is a massive shift.”

“We note that Bill English said today that ‘this is the rainy day the Government has been saving up for’. This Government inherits a very negative economic outlook but 4.2% unemployment and a 17.5% gross debt to GDP ratio. In 1999, the Labour Government inherited a positive economic outlook but 6.8% unemployment and 37% gross debt.”

“The CTU welcomes the commitments made today to increase capital spending, bring forward some smaller infrastructure projects, and continue with measures to support workers made redundant.”

“However we are concerned about unreasonable pressure being put on the public sector and note that the Budget Policy Statement says that “there may be some service delivery risks in some areas”. The Government should clarify what they mean by this statement.”

“On the positive side there is low public debt, relatively low unemployment, falling interest rates, a lower dollar, recent falls in petrol and food prices and some stimulus (especially for those on middle and high incomes) via tax cuts.”

“However the negative side is that employment intentions are weak, our trading partners are contracting rapidly, the real economy impact of the global financial crisis is spreading, and we have already been experiencing a recession due to falling house prices and a drought. The fiscal outlook is for significant and rising deficits.”

“Higher tax for those on low incomes, major reductions in KiwiSaver, threats against ACC, the removal of the right to appeal against dismissal for new workers employed by smaller enterprises and the likelihood of further attacks on holidays and employment law are a real concern.”

“If the Government is serious about closing the real wage gap with Australia in the long run and supporting workers affected by redundancy in the short run, they need to reassess their policy priorities urgently,” Peter Conway said.