5 Jun 2013

OECD calls on NZ to lower debt faster

1:05 pm on 5 June 2013

The Government is being urged to bring debt down faster as part of plans to help lift the country's performance.

In its latest two-yearly review of the economy, the Organisation for Economic Co-operation and Development (OECD) says the economy is starting to pick up, and the Government's focus on cutting spending and debt is the right one.

But the Paris-based organisation says the Government should bringing net debt to 20% of GDP by 2020 sooner, given high private-sector indebtedness and rising superannuation costs.

It also says a capital gains tax and higher retirement age would help.

Finance Minister Bill English has rejected the recommendations, saying he is sure the Government's policies will boost the country's future prosperity.

Employers and Manufacturers Association chief executive Kim Campbell says the amount of private debt is the issue, not Government debt which is incurred largely from building infrastructure which helps the economy.

He says a capital gains tax would not necessarily work in New Zealand.

Kim Campbell says private homes would need to be excluded because so much of the country's private wealth is in them, and he questions what that would really accomplish.

Council of Trade Unions economist Bill Rosenberg agrees that Government debt is not the problem.

"The biggest problem is our international debt which is largely private debt and the report really doesn't do nearly enough to address that really fundamental problem."