3 Mar 2013

Economy fears over US spending cuts

8:28 am on 3 March 2013

The New Zealand United States Council says it's too early to tell exactly how steep US spending cuts will affect this country.

US government agencies will have to trim a total of $US85 million from their budgets between Saturday and 1 October after talks between President Barack Obama and congressional leaders failed to avert the automatic cuts.

Mr Obama has warned the cuts could slow US economic growth and cost 750,000 jobs. The IMF has said they may slow global economic growth.

New Zealand United States Council chief executive Stephen Jacobi says the worry is that the US economy could plummet back into recession.

"The main way this impacts on our economy is through our exchange rate, and it's through the ability for New Zealand to continue its business around the world, not just with the United States."

US Democrats say the cuts could cause air traffic chaos and long waits at US passport desks, as control towers are shut down and traffic controllers are forced to take unpaid time off.

Travel Agents Association chief executive Andrew Olsen says travellers to the US should check with their airlines and look at government websites for any alerts relating to delays with border control.

The US spending cuts, known as the sequester, came into effect at midnight on Friday despite both Democrats and Repblicans opposing them.

Both sides agreed in 2011 on automatic cuts if the president and lawmakers failed to fashion a method of tackling $16 trillion budget deficit.

Such a deal proved elusive, as Democrats insisted tax increases be part of a solution to ending the automatic cuts, an idea Republicans rejected.