Thursday, September 13, 2012

National's economic death spiral

The Reserve Bank made its usual OCR announcement today - and in the process told us what we already know: that National's austerity is strangling growth:

The New Zealand government's drive for fiscal austerity will hold back growth and keep interest rates lower for longer, the Reserve Bank says.

The central bank cited the government's clamp down on spending in a bid to get back to an operating surplus by 2015 as a constraint on economic growth and a reason behind New Zealand's historically low interest rate environment.

The bank says the government's efforts to build its revenue base through spending cuts and raising indirect taxes will slice four percentage points from nominal gross domestic product over the next four fiscal years.

That in turn slices roughly $2.7 billion from government revenue in 2015 [PDF, p. 9]. So austerity and cuts become a self-fulfilling prophecies: you must cut because there is no growth, and there is no growth because you cut. And National is totally committed to this policy, driving us further and further into an economic death spiral - just like they did in the 90's.

And this is the party which sells itself as "better economic managers". Pretty obviously, they're not.