27 Jan 2012

Govt using global economic turmoil as excuse, says Labour

12:03 pm on 27 January 2012

The Labour Party says there will be further cuts to the public service if the Government is to achieve its return to surplus.

In a speech on Thursday, Prime Minister John Key said the expected budget surplus in 2014-15 would be $300-$500 million, about a third of the $1.45 billion predicted in the Treasury's pre-election fiscal update.

Mr Key has indicated there may need to be further spending cuts and is not ruling out another zero-budget.

Labour Party leader David Shearer told Morning Report he doubts the financial situation in Europe is so much worse than before the election as to justify such a reduction in the predicted surplus.

"The Prime Minister is using Europe to a large extent to set us up for economic under-performance."

He said Mr Key has said nothing that gives any hope on growing the economy, and New Zealanders will simply leave for Australia in bigger numbers.

Mr Shearer said sharper public sector cuts are inevitable to get back to a surplus.

Economic slide not foreseeable - Dunne

New Zealand First leader Winston Peters said the forecast Mr Key was highlighting before the election was too optimistic given the global economic conditions that were well known at that time.

However United Future leader Peter Dunne says the Prime Minister could not have foreseen a dramatic slide in global economic conditions.

Mr Dunne says that since the original prediction was made there has been been a significant downturn in the international economy.

"We're in a very difficult international economic situation at the moment and New Zealand can't stand alone from that."

He says comments that situation should have been foreseeable before the election are "political cant".

Mr Dunne says as Revenue Minister he may have to review the tax system if the global economy worsens.

Unions, business set out views

The Council of Trade Unions (CTU) says the Government is overreacting to the dire global economic situation and cutting back too much.

CTU economist Bill Rosenberg told Morning Report the initial target was inflexible and the Governent should have had a sound alternative plan.

He said it is instead falling into the same trap as countries such as the UK and Greece whose austerity measures are forcing them back into recession.

Business New Zealand chief executive Phil O'Reilly says the Government should make cuts to interest-free student loans and to Working for Families spending.

Mr O'Reilly says that if there is a global recession and slowing of growth in New Zealand, businesses will pull the country out of it, not the Government.

He says firms need confidence to invest in people and equipment, because they are the key to keeping the economy afloat.