Tuesday, 29 March 2011

Finance Minister Admits He Has No Master Plan

From Radio New Zealand's Morning Report 30 March 2011:

Finance Minister Bill English is defending the timing of further cuts to the public service amid warnings it may ultimately be bad for the economy.
Mr English announced on Tuesday there will be more consolidation of departments and agencies over the next two or three years, with fewer positions in core government administration.
He said he has no master plan but with 38 departments and more than 150 Crown entities there is too much duplication in the public service, and details will be released as decisions are made.
The chief economist at research firm BERL, Ganesh Nana, says the cuts should be made when the economy is strong and public servants have somewhere else to go to get another job.
But Mr English told Morning Report the Government has borrowed money as the need has arisen - but when it reaches one of the highest deficits ever, it has to turn the situation around.
The minister said the Government is not heading for a major restructure; changes have been moderate and it will continue to focus on long-term gains and trimming back-room costs.
Mr English says though many services will continue to be delivered through government agencies, increasingly, they will also be provided by private groups and the Government is looking carefully at areas where providers compete for contracts.
Ganesh Nana says the cuts risk hurting the Government's accounts, rather than helping them and now is not the time for aggressive action.
Mr Nana says any rebalancing of Government accounts should happen when there is strong economic growth and competition for resources.
Cutting spending risks tipping the economy into a very long period of depressed activity and hurting the books even more, he says."

This is nuts! In a recession the last thing you want to do is make masses of people unemployed. There is a fundamental contradiction at the heart of the government's economic policy. They are explicit in their desire to "rebalance"the books. But at some point customers need to purchase things to get the economy moving again. What scares me as well is that Bill English says he has no master plan! I will write more on this shortly.

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