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Question over long term economic plans

Published: 10:48AM Sunday March 22, 2009 Source: ONE News

Prime Minister John Key says there are more economic initiatives planned to help New Zealand through the recession, including borrowing $40 billion.

While discussing  the government's decision to lay staff off in the public sector while trying to prevent job losses in the private sector, Key said that his government are actually "preserving the vast bulk of public sector jobs" and will be borrowing the better part of $40 billion over the next three years.

"What we are trying to do is come through this recession with as strong a balance sheet as we still can, as I said we'll be borrowing $40 billion at least over the next three years, debt to GDP will be blowing out from about 18, 19% to 33% by 2013."

Key said there will be a couple of announcements in the Budget which will tackle the recession and likely more to follow post-budget.

He said he has asked Finance Minister Bill English to look at suspending Super Fund contributions as a Budget item.

"There is the capacity within the law to either pay in a lower amount or temporarily suspend payments."

He said the most important thing to do in these economic times is to instil confidence.

"That's a constant arm wrestle between people who are fearful of what they're seeing overseas or within their own business domestically and a sense of where we're going ... I think it's important to keep that confidence going."

Key believes New Zealand will be coming out of recession "reasonably aggressively" in year's time after two to three quarters of negative growth.

Details?

Political commentator Therese Arseneau believes Key needs to start getting specific about his government's plans to move New Zealand through the recession quickly.

"To build confidence we need to know that National has a plan.

"He (John Key) talks optimistically but I see no action plan in terms of what he's going to do to maximise our competitive advantage."

Arseneau says there are two steps to economic recovery.

On the first front - short term measures that will save jobs and provide social help for the effects of the economic fallout - National are providing. But Arseneau says the government has yet to deliver anything concrete on the second, and most important measure, which is that the government needs to pull the country out of the recession quickly and strongly.

She says countries in Asia Pacific will come out of recession quickly and the government needs to tie New Zealand's upswing to potential trading partners such as China and Australia.

"We have good ties with Australia and I think they're going to come out quickly. And lets face it, China is a growth country and we don't have as much trade at the moment with China," says Arseneau.

Phil O Reilly from Business NZ agrees that a better understanding of National's strategy is needed but says the depth of the global recession makes it difficult to get long term strategy right.

"If it was just us and a few other countries in recession then maybe the usual rules would apply."

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