The scale of the economic vandalism being unleashed on this country rivals that of Sir Robert Muldoon. This prime minister and her finance minister, in cahoots with a weak central bank governor, are destroying 36 years of prudent fiscal and monetary economic management.
They do not understand economics. They do not understand business. Even more frightening, they do not understand the importance of the institutional legacy they have inherited and are in the process of destroying.
This is an inexperienced government who have panicked at the economic fallout of their recent decisions. In order to avoid the inevitable and painful reallocation of resources required after a major economic shock they are not only destroying the Crown’s balance sheet – they are undermining the integrity of critical institutions and traditions.
An extra $85,000 of debt per household!
This year Treasury have failed. They are forecasting unemployment will rise to 8.6 per cent this financial year, based on the surge in government spending. It is currently 5.2 per cent. Even better, the fall in GDP is projected to be just 4.6 per cent.
Let’s look at some underlying realities.
According to the Ministry of Business, Innovation and Employment, tourism employs – directly or indirectly – 330,000 people and accounts for 5.8 per cent of our GDP.
International tourism was about 40 per cent of this total and we can safely assume that domestic tourism will fall dramatically. A 1 per cent rise in unemployment is roughly 28,000 jobs.
Job losses in the tourism sector alone will push us over the Treasury forecast.
If even a third of those currently employed in construction lose their jobs unemployment will surge past 10 per cent. If we manage to keep unemployment under 20 per cent, the level that some economists believe is the real rate in the United States today, I will be pleasantly surprised.
I agree that the economic forecasts seem far too optimistic.