The Government's focus on debt reduction through asset sales will do little to transform the wider structural weaknesses of the New Zealand economy as indicated by Treasury's worse than forecast current account deficit figures, the Green Party said today.
Treasury forecasts for New Zealand's current account deficit are significantly worse than those made in the Pre-Election Economic and Fiscal Update in October 2011. Treasury are forecasting the deficit to balloon rapidly to 4.1 percent of GDP next year compared with a forecast of 2.4 percent in October.
"The rapidly deteriorating current account figures highlight the Government's inability to manage the wider economy onto a more sustainable and resilient footing," said Green Party Co-leader Dr Russel Norman.
"And Treasury highlight in their economic outlook that the risks are all still on the downside.
"When seen in this light, the sale of high-earning state-owned assets is a sad side-show to the bigger structural problems in the real economy.
"Selling assets throughout the entire economy to foreigners to pay off debt is going to become synonymous with this Government's economic legacy."
Dr Norman argued that while getting the Government's books in order was important, Government debt is low by OECD standards so the Government's main focus for economic management should be on addressing the economy's structural weaknesses which encourage New Zealanders to live beyond their means.
"Our high current account deficit is driven by factors like the current tax incentives to borrow to invest in property due to our lack of a capital gains tax," Dr Norman said.
"Ninety-five percent of our banks are in foreign ownership. They send most of their record profits offshore every six months.
"This Government has no plan to lower our reliance on expensive energy imports, like oil. It's poor quality of spend on shiny new motorways, for example, actually heightens our reliance on oil imports and our increasing inability to pay for them.
"There are smarter ways to manage our economy and selling our last best assets into foreign ownership isn't one of them."