KEY POINTS:
The forecasts to be presented by the Treasury to the new National Government today are expected to show a sharp deterioration on the last ones, which did not take into account the marked decline in outlook for global growth.
But Labour is urging Finance Minister Bill English not
to be too negative in the wake of the 2008 budget policy statement.
"National may see it as in its interests to promote negativity on the fiscal picture," said Labour spokesman David Cunliffe, "but to do so would drive economic confidence down still further, and would be an irresponsible action in the current climate ."
Mr Cunliffe also called on Mr English to come up with a plan in response to the downturn, not just a consumption-based response comprising mainly tax cuts.
Mr English said in Parliament this week that today's books would outline what amounted to what Treasury estimated to be a $7 billion stimulus of the New Zealand economy.
That was based on the 2008 Budget, Labour's October 1 tax cuts, and National's April 1 tax cuts that were passed into law last week.
"Treasury estimates that over the next two years, that amounts to the $7 billion stimulus to the economy and that is one of the largest in the developed countries - larger than Australia's and comparable to the packages announced by the UK Government [on a per capita basis]."
The official Pre-election Economic and Fiscal Update was presented to former Finance Minister Michael Cullen on October 6 and forecast 10 years of deficits of up to $7 billion.
While it set out a significantly gloomier set of forecasts than those in the May Budget, it was quite outdated, given that it was based on figures from the end of August. Since then the global situation has deteriorated markedly and today's outlook will take the downturn into account. The Treasury will present a range of options based on various global scenarios.
The Governor of the Reserve Bank, Alan Bollard, said on December 4 he believes the recession that started in the second quarter of this year was technically over and that there would be low growth for the next four quarters.
Secretary of Treasury John Whitehead also said on Radio New Zealand on Tuesday that New Zealand "will be slowly coming out of the technical recession" - two consecutive quarters of negative growth. "But growth will still be a lot slower than it has been in the past."
He said it would not be until mid 2010 that New Zealand would come out of the slowdown. He tempered his comments by saying: "The truth is, I think, that nobody knows for certain."
