Government departments are bracing for the unemployment rate to reach double figures as the economy shrinks and the outlook for New Zealand's trading partners gets bleaker.
Prime Minister John Key refused to speculate yesterday about how high unemployment could go, but rejected a calculation by think tank the New Zealand Institute that it could reach 11.2 per cent.
He said the Government was concentrating on ways to curb the rise in joblessness, including options to be considered at Friday's job summit, rather than seeking regular Treasury updates.
"There's two options, isn't there? Option A is I spend every day on the phone to Treasury asking what the latest prediction is. Or option 2 is I actually get on and do something about it. We're taking option B," he said.
Picking the ultimate peak of joblessness was "highly subjective" and influenced by factors beyond his control, such as how other countries performed.
"I don't think we should spend a whole lot of time contemplating our navel about whether it is going to be 6 per cent, 7.5 per cent or 8. All I know is that predictions show unemployment will rise and any New Zealander losing their job worries me."
But Labour finance spokesman David Cunliffe said that was ridiculous. "Of course good policy is based on good data." Where fear was a major factor, the best policy was "levelling with people".
The Treasury's next full forecasts will be prepared in April, for inclusion in the May 28 Budget.
Its "worst case scenario" in December was for unemployment to hit 7.5 per cent over the next 18 months, adding 68,000 to jobless numbers.
But government sources said officials were already signalling worse news ahead.
Mr Cunliffe said he understood the Social Development Ministry was making contingency plans for 100,000 unemployed this year, suggesting it was prepared for the rate to reach 9 per cent. Unemployment hit 10.9 per cent in 1991.
The ANZ Bank yesterday warned of longer dole queues ahead, saying it now expected the economy to shrink 3 per cent this year, pushing unemployment to nearly 8 per cent.
- The Dominion Post