New Zealand is too reliant on raw commodities under National, and the Government is being tricky with the books, opposition parties say.
Treasury Secretary Gabriel Makhlouf, left, and Finance Minister Bill English. Photo: RNZ (file)
In its pre-election economic and fiscal update, the Government's financial advisor is picking the economy will grow about 2.8 percent on average over the next four years, driven by the rebuilding of Christchurch, rising immigration and historically high commodity prices.
But slumping dairy and log prices due to weaker demand from China will provide less support to growth than previously expected.
The Treasury is forecasting economic growth will now peak at 3.8 percent in the March 2015 year - compared with 4 percent in May's budget - before easing back to 3 percent the year after, and 2.2 percent and 2.1 percent in the two years after that.
That in turn will affect the Government's financial position, with smaller surpluses now predicted due to a lower tax take.
A budget surplus of $297 million is expected in the June 2015 financial year, down from the $372 million forecast in May.
Photo: RNZ / Jane Patterson
The growth in subsequent surpluses have also been pared back, rising to $800 million in the June 2016 financial year, $1.9 billion in 2017 and $3 billion by 2018.
Net debt is expected to to fall to 20 percent of GDP by 2012, a year longer than earlier predicted, after peaking this financial year.
Unemployment is slightly higher, falling from 5.6 percent in the June quarter this year, to 4.5 percent by 2018.
The Treasury is forecasting another 151,000 jobs will be created over the next four years.
David Parker. Photo: LABOUR PARTY
The Green Party believes the Government is promising surpluses by cutting spending on health, education and the environment by $3.8 billion during the next three years.
The party commissioned independent economic consultancy Berl to analyse the Government's books in the run-up to the election.
Greens' co-leader Russel Norman said the analysis showed National would cut health spending by $672 million between this year and 2017, and education spending by $212 million during the same period.
Labour finance spokesperson David Parker said New Zealand's dependence on commodity prices highlighted the need to change.
"It absolutely proves the case for a need to upgrade our economy in the ways that the Labour Party is proposing," he said.
"We need to diversify our economy and boost exports through a focus on investment in the productive sector in innovation and industry."
No significant change
But Finance Minister Bill English said the update showed the economy and the Government's books had not changed significantly since May's Budget.
"While the surplus is a bit smaller than forecast in the Budget, we will achieve one, and the surpluses forecast for subsequent years have fallen by around $500 million each year," he said.
Mr English said the impact on the tax take would be felt.
"It just shows the kinds of risks there are to being able to maintain sufficient surpluses to be able to pay off debt and exercise other choices," he said.
"That's going to be a relevant through this period up to the election, because the opposition parties have essentially committed all the spending for the next four budgets, according to our numbers."
Now was not the time to put the country's good progress at risk with more taxes and higher government spending, he said, taking a swipe at the political opposition.
However, Council of Trade Unions economist Bill Rosenberg said the country's reliance on volatile commodity prices was holding the economy back.
Mr Rosenberg said it showed the Government had missed the opportunity after the global financial crisis to build a high-growth, high-wage, export economy.
"The highest growth rate they're forecasting is around 3.3 to 3.8 percent. The current growth rate of 3.3 percent is below the average of the 2000s," he said.
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