“The International Monetary Fund’s growth forecast released overnight shows the Government has been delusional and its fiscal strategy will be close behind,” says ACT Leader David Seymour.
“Most people have proceeded on the assumption that debt would top out at 54 per cent of GDP, a level that was just manageable. It now appears those forecasts were overly rosy, and the next Government will have to start again with fiscal strategy.
“The IMF forecasts the New Zealand economy will contract 7.2 per cent in 2020, in comparison with the Treasury’s Budget Economic and Fiscal Update forecast of 4.6 per cent.
“The IMF forecast for Australia is for a 4.5 per cent contraction, a significantly better outlook than New Zealand’s. The New Zealand result will partly reflect our greater reliance on tourism, and also our much stricter lockdown. But, the reasons don’t change the impact of government debt on younger New Zealanders.
“The people who should be most concerned are young Kiwis. The same Treasury data that shows government debt reaching 54 per cent of GDP was based on its rosy economic outlook. The IMF forecast means lower tax receipts and higher welfare rolls among other outcomes that will increase public debt.
“ACT has long said that the Government’s splurge would not work. Low quality spending on initiatives such as a billion dollars for people to go out and shoot wallabies or weed the conservation estate is unaffordable.
“I hear from young people who ask ‘who is the Government borrowing $140 billion from, and who will have to pay it back?’
“The next Government will inherit a fiscal mess and will have to review expenditure from a baseline of zero, keeping not what is politically trendy, but what is affordable and absolutely necessary.”