Labour’s financial legacy

At Backbenches last night, Charles Chauvel said that Labour has left National a very good set of accounts with lots of money, and would be making sure they looked after it.

This caused some consternation in the audience and phrases like a decade of deficits emerged.

Anyway Dr Cullen has released the latest forecast from Treasury – as of Friday. So let’s see what National is being left with:

• Unemployment now to peak at 5.7% instead of 5.1%
• Nominal GDP to be $15 billion lower for 2009-2013 than in PREFU.
• The OBEGAL deficit and cash deficit to both worsen by around $1.5 per annum from 2010
• An extra $5 billion of debt up until 2013, compared to PREFU
• Real market investment to decline by 13% in 09/10
• GDP growth for 08/09 estimated t be just 0.4%
• OBEGAL deficit to hit $5 billion in 2012/13
• The cash deficit in 2012/13 to hit $9.1 billion

The nominal GDP figure puts it in perspective. The NZ economy will generate $15 billion less over five years.

The focus has to be on increasing economic growth.  Bill English is going to have a very hard time trying to get the Government out of a cycle of debt and deficit.