Labour leader Phil Goff is accusing the government of writing off high unemployment, as the price New Zealand has to pay to recover from the recession.
But Finance Minister Bill English says saving, not spending, is the key to long-term economic health.
"If people were rushing back to the shops and the housing market then I would be a bit concerned that New Zealanders hadn't got the message," English told TVNZ's Q + A programme.
The message is pay off debt, save more and spend less.
Retail profits are down and sale signs are up because people are not spending.
Unemployment is nearly as high as it was last year in the height of the recession but English said 159,000 people unemployed is part of the rebalancing of the economy.
"Well to some extent it is because a lot of those jobs were dependent on this credit-fuelled economy that we had, particularly from 2005 onwards, and we are going to see a shift of jobs into the export sector," he said.
Labour leader Phil Goff said that is an extraordinary admission.
"It's the first time the Minister of Finance has admitted that
having that level of unemployment is a deliberate choice - what he
calls rebalancing - but rebalancing the economy on the back of tens
of thousands of New Zealanders who are out of work," said
Goff.
On October 1 GST will go up and income tax will come down. The
government says the average worker will be $15 a week better off
after the tax switch, but the Finance Minister doesn't expect
consumers to start opening their wallets and spending more.
"Well I think a lot of them are going to use it to pay off debt,"
said English.
ONE News political editor Guyon Espiner said that may improve New
Zealand's economic health in the long term but it's little comfort
for retailers and job seekers right now.
And the so-called rebalancing of the economy can be painful.
Alasdair Thompson of the Employers and Manufacturers Association
said the economy is struggling.
"I think people were expecting to see growth this year and to them
it hasn't happened. Retail sales are low, the domestic economy is
not going well at all," he said.
