Close

Budget 2012: Growth and austerity incompatible

Today's austere budget poses a risk of sending the country back into a recession, an economist says.

Today's austere budget poses a risk of sending the country back into a recession, an economist says.

“Today’s budget may be ‘austerity-lite’ but it’s the same failed logic that is being rejected in Europe. With danger signals in Europe and falling agricultural export prices, the zero budget poses a real risk of sending us back into recession," said CTU economist Bill Rosenberg.

“We’ve seen high GDP growth forecasts time and again, but they have never actually showed up. Instead we have seen unemployment exceeding forecasts, lasting longer and affecting more people."

He said too many Kiwis were out of work or earning low wages, and while the investment in the Advanced Technology Institute was positive it fell short of what was needed.

"You can’t have growth and austerity, it just doesn’t work. With government debt still among the lowest in the OECD, it had room to move with real investment in job creation, economic growth, and looking after those who are most vulnerable."

He added: “The tax changes targeting smokers, school children and the family bach announced today will only raise $289 million in 2012/13, and won’t address the loss of revenue and inequalities caused by the tax changes of 2010 which gave tax cuts to high income earners while hitting low income families with GST hikes.”

Labour leader David Shearer labelled this the "airport departure" budget that would drive more Kiwis overseas.

“This truly is a zero budget. It has zero growth and zero aspiration for New Zealanders. It offers zero hope that it will grow our economy now or in the years ahead. It fails to make the tough choices."

Earlier today, Labour’s finance spokesperson David Parker said National made promises every year on exports and jobs but always failed to meet them.

“Even if the National government limps back to surplus by 2014/15 that won’t cure our fundamental problems," he said.

“We also need growth in jobs, growth in the breadth of exports, growth in total exports, growth in GNP per capita. On these measures National has failed."

Students in particular are unimpressed – a number of those at the universities of Auckland and Victoria protested this afternoon against the 'black budget', in particular, the new limits on student allowances (to 200 weeks and freezing the parental income threshold).

“In the last year alone we saw the removal of student loans for living and course costs for people aged over 55, removal of the course-related costs component of student loans for part-time full-year students and overall funding in Tertiary Education expenses was projected to fall to 4.1 Billion by 2015 – a drop of around 300 million since 2010," said Pete Hodkinson, president of the New Zealand Union of Students Associations.

“Students understand that there is limited funding but are looking to the government to take constructive action in this budget and start investing in education, ensuring fair access, and tackling student debt.

“Both Australia and the US have systems which target students who are at least making a living above the poverty line and meanwhile our repayments are kicking in too low and are proposed to increase."