We all must help pull NZ out of the crap

Brian Fallow in the Herald is a recommended read today.

No, he’s not very cheery. But he has done a good job of putting us in the picture about “the hard word delivered to the rest of the public sector, in a pointedly public way, by Treasury secretary John Whitehead this week…”

He also reminds us we all have a part to play in pulling NZ out of the economic crap.

You only have to look at the spending track, past and forecast, in the Budget to see that some serious belt-tightening is expected.

Over the past four fiscal years annual spending grew by $17.5 billion, or about 9 per cent a year.
Over the next four years spending is forecast to grow $11 billion, less than 4 per cent a year or 1 per cent at most in real per capita terms.

But that would still, on the Treasury’s forecasts of economic growth and revenue, see a cumulative $35 billion in operating deficits, driving gross debt from 25 per cent of GDP now to 39 per cent in 2013.

Whitehead noted that the government is a large part of the non-tradeables sector, which over the past five years has grown by 15 per cent. The tradeables sector, where the country earns its living as a trading nation, contracted by 10 per cent.

“To help New Zealand compete internationally and lower costs to exporters we have to raise the quality of public spending and ensure the lion’s share of increased national resources goes not to the public but to the private sectors,” he said.

“In other words the public sector has to raise its productivity – provide more for every dollar spent – and grow more slowly than the private and export sectors, to rebalance the economy.”

This was likely to be echoed in the work of the taskforce led by Don Brash which has been asked to recommend policies to achieve the goal of closing the income gap with Australia by 2025, Fallow pointed out.

But then he noted:

* We need to be realistic about how compressible Government spending is in a democracy.

* The message about living within straitened means applies as much to the household sector as to the Government.

* And the message about raising productivity applies as much to the business sector as to the public sector.

A major rebalancing is needed – less spending and more saving by households, more investment and a stronger export focus by the business sector, and a tight rein on Government spending. But this won’t happen automatically or easily.

Couldn’t agree more.

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