Determined to keep deficit in check

KATE CHAPMAN
Last updated 05:00 15/11/2012
Finance Minister Bill English.
CHRIS HILLOCK/Fairfax NZ
BILL ENGLISH: "I can assure the Opposition that we are as concerned as they are [about unemployment]."

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Finance Minister Bill English is at odds with his own top policy advisers over whether the current account deficit is at its worst or will continue to deteriorate.

Mr English yesterday told Parliament's finance and expenditure select committee he believed the current account deficit - the balance between the country's earnings and expenditure - would peak at 5 per cent or 6 per cent of gross domestic product (GDP).

Forecasts suggest it may go as high as 8 per cent. In September, the deficit widened to $10.1 billion, or 4.9 per cent of GDP.

Labour MP Clayton Cosgrove asked what Mr English knew that the International Monetary Fund, Reserve Bank and Treasury did not. "What do you base your prediction on? Evidence, data, crystal ball, best guess?"

Mr English said he was more optimistic than other forecasters, who expected New Zealanders to return to their high-borrowing ways.

"I don't think the world will let us run 7 and 8 per cent current account deficits. I think you would get the kind of sharp adjustments that the textbooks tell you would happen in the exchange rate or interest rates. I think the world will punish us more quickly if it gets out of line."

The world was different now, he said. "I think we would all be worried if we saw an obviously unsustainable current account deficit; building up external liabilities in a world where no-one likes that much."

The Government has also questioned official jobless figures. Prime Minister John Key said he was surprised by last week's household labour force survey, showing the highest unemployment rate in 13 years.

Mr English said there was something going on there that the statisticians could not explain. However, the number was too high. "I can assure the Opposition that we are as concerned as they are [about unemployment]."

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