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The big questions

28/12/2008

A thoughtful article from 18 December, by Brian Fallow in the NZ Herald on the Treasury update. As fallow indicates Michael Cullen’s rainy day has become a storm and the projected borrowing track has become potentially an albatross around the neck of the government.

He notes that Bill English has said that will not happen:-

Finance Minister Bill English made it clear the projected outlook of steeply rising debt, absent a policy response, was not going to be allowed to happen.

We will have to wait for his first Budget to learn what the Government plans to do about it.

It would take two things, neither of them easy.

One is to improve the quality of government spending on a permanent basis, he said, adding swiftly that this was not the time to slash and burn.

The other is to get the economy growing faster than the 2.5 per cent a year the Treasury reckons its trend growth rate is.

This is a tall order.

But it gives us a measuring stick by which to assess Government policy measures from here on: What will they do to lift productivity?

Failure on that front will just load on to the shoulders of future taxpayers an ever-heavier interest burden, on top of the higher pension and health costs the ageing population already implies.

The question is the right one, just what will the Government do to create a climate that will drive productivity and employment up? The corollary is whether NZ Business has the ability to achieve the desired outcome, or will they wallow in a trough of complacency and reliance on fiscal policy rather than on innovation and risk taking? These are the big questions. But does anyone have the answers?

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