18 Nov 2009

English rules out economic shock treatment

8:50 am on 18 November 2009

Finance Minister Bill English has ruled out a Treasury suggestion that the Government should cut its spending by $2 billion or $3 billion.

In the paper to the minister in August, obtained by Radio New Zealand under the Official Information Act, the Treasury said significant spending cuts would help keep interest rates lower and bring down the value of the New Zealand dollar.

It says the effect would be to cut household spending, encouraging domestic firms to expand into export markets to find more business.

Mr English says the idea has some economic merit but the Government is not going to risk losing the faith of voters by applying shock treatment to the economy.

"Treasury is saying pretty much what it has always said, that shock treatment works best, you'll get more progress more quickly if for instance you take two or three billion off Government spending."

Mr English says the Government will not make overall cuts, but will slow the increase in public spending.