21 Mar 2011

IMF warns NZ to get finances back on track

5:43 pm on 21 March 2011

The New Zealand Government must get its finances back on track despite recent damaging earthquakes, the International Monetary Fund has warned.

New Zealand remains vulnerable to a rise in global interest rates if the deficit is not tackled, it says.

Last year, the IMF advised the Government to get its books back into surplus by the 2013-14 fiscal year.

It now says the Canterbury quakes on 4 September 2010 and on 22 February this year means delaying the surplus by a year is more appropriate.

The fund's mission chief, Ray Brooks, says cutting government spending is the best way to get the books back in the black.

However, it is also recommending a capital gains and a land tax for the first time, along with a higher goods and services tax.

Mr Brooks says tackling the deficit would reassure lenders worried that New Zealand's high overall debt level could impair repayment in the event of another downturn in the world economy and rising interest rates.