Prefu report highlights benefit of strong fiscal management

Monday 6 October 2008, 5:49PM

By Michael Cullen


The Treasury's Pre-Election Economic and Fiscal Update report, published today, highlights the benefits of maintaining strong Crown accounts during the good times in order to help us through the hard times, Finance Minister Michael Cullen said today.


"Thanks to the prudent approach to fiscal management that we have taken over the past nine years, we will not have to descend into any slash and burn response to the current slowdown as previous governments have so often tragically done in our nation's history during previous economic downturns," Dr Cullen said.


"The Government's strong investment in skills, in training, in tertiary education, in roads and rail, in public transport and in security of energy supply are all critical to raising our economy's productivity over time and this investment is secure in the years ahead because of the prudent approach to fiscal management adopted since the start of the new century," Dr Cullen said.


"The government's social spending programmes in health and education service delivery, in maintaining the level of New Zealand Superannuation, in promoting the transformation of our personal savings culture are also secure because of the prudent approach to fiscal management adopted since the start of the new century," the finance minister said.


"The Treasury's report makes it clear that the Government's strong investment programme is happening at an appropriate time of economic slowdown and that the government's investment and social programmes are secure over the next few years.


"What is also clear, however, is that now is not the time for promises of any additional tax bonuses over and above what is already legislated for by Parliament," Dr Cullen said.


"But the report also indicates that, once we get through this troubled period for the international economy, then the prudent and wise approach will be to utilise a strengthening economy to once again build-up the Crown balance sheet into a stronger position through fiscal restraint," Dr Cullen said.


In its release today, the Treasury forecast subdued growth in 2009, before the economy returns back to around 3 per cent annual average growth in calendar 2010. The Treasury forecasts that the Crown's gross debt will rise to 17.4 per cent by June 30, 2009 and reach around 22 per cent by the 2011 general election, while the Crown's net financial asset position, inclusive of financial assets of the New Zealand Superannuation Fund, is predicted to remain in positive territory through to the end of the forecast period ending June 30, 2013, although only marginally by that period.