17 May 2013

Economist praises focus on debt reduction

9:44 am on 17 May 2013

The ANZ bank's chief economist, Cameron Bagrie, says the Government's focus on reducing debt will help protect the economy from unexpected shocks.

The Budget delivered on Thursday by Finance Minister Bill English forecasts that a stronger economy will return the Government's books to surplus in two years' time.

Mr English also signalled further restraint by saying the aim is to cut net debt from 29% of GDP to 20% by 2020.

Mr Bagrie says it's a sensible strategy, particularly when credit-rating agencies are still concerned that private debt remains very high.

"We've got to deliver very strong fiscal projections to make sure we're off the radar," he says, and the way to do that is to "make sure fiscal targets are hit", so that so debt goes down not up.

However, Council of Trade Unions economist Bill Rosenberg says the emphasis on debt reduction is all wrong. He says jobs and reducing child poverty should be the Government's main priority, not reducing debt.

In response to the Budget, the ratings agency Standard and Poor's has left New Zealand's creditworthiness unchanged at AA+.