PREFU: The rainy day has arrived - but we've forgotten to buy the raincoat and now we can't afford one without going into debt
It's official. Cullen has screwed the economy after eight prosperous years with minimal growth. Cullen was so out of his comfort zone that it is frightening. Now we are in the bad times we will have nothing to show for it except more debt and more government deficits. Gross government debt to rise from 17.4 per cent of GDP to 24.3 per cent by 2013 against the Government's target of 20 per cent of GDP on average. Our dollar is expected to decline in value by 22.7 percent by 2013, inflation is expected to be 4.5 percent next year.
How did this happen? From Stuff .
We had government policies that were open-ended that it was impossible to predict the uptake and when more took part in KiwiSaver and 20 hours free that blew the budget for those items. KiwiSaver alone is $280 million above forecast and benefits were $500 million more than forecast. We have only $500 million in the bank for spending.
In addition, households and businesses had come under increasing cost pressures, meanwhile, including higher electricity, interest rate, fuel and food prices, which had dampened private consumption and business profitability.
Labour can't manger the economy we have surpluses,how on earth can he manage it when we have deficits?
However there's some good news. )Its not the end of the world. And to date this is the only blog to provide some good news on this fiscal update, because we like to be positive here.
Because we are going to run deficits for at least 10 years and there are other spending priorities, there will be no money for completion of Treaty Settlements and so it will be at least 2025 before historic claims are settled and so the Maori seats are safe for some time yet.
For those interested, the PREFU reports are all here showing that the economy is indeed PREFU'd.
UPDATE and I've just noticed on Lindsay Mitchell's site that the projected cost for the ETS is $1 billion - under Heritage, Culture and Recreations expenses. I wonder who the minister for Culture and Heritage is.