Thursday, May 23, 2024

OECD report reinforces need to control spending

The OECD’s latest report on New Zealand reinforces the importance of bringing Government spending under control, Finance Minister Nicola Willis said today.

The OECD conducts country surveys every two years to review its members’ economic policies. The 2024 New Zealand survey was presented in Wellington today by OECD Chief Economist, Clare Lombardelli.  

OECD Chief Economist, Clare Lombardelli.  

Minister Willis says the survey notes that “spending overruns” and “slippage” after the pandemic “led to a permanent increase in the government spending to GDP ratio, resulting in a substantial deterioration of New Zealand’s fiscal position” with the levels of macroeconomic stimulus “more inflationary than elsewhere”.

The report goes on to recommend that “the government should set operating allowances and tax policies that will gradually reduce the fiscal deficit to reach budget balance”.

“This affirms the Government’s decision to steadily bring government spending under control through our ongoing fiscal sustainability programme. It also reinforces our approach of fully funding planned income tax relief through offsetting revenue and spending measures,” said Ms Willis.

The OECD highlights other areas for government attention including the need to enforce competition policy, ease overseas investment settings, lift educational achievement including through a more detailed national curriculum and advance reform of the resource management planning system.

“The Government is already acting on many of the initiatives proposed by the OECD and we will give consideration to its other recommendations.”

“While we do not agree with the OECD about everything, we welcome its expertise and the opportunity to have our thinking tested by it.

“This report reinforces the urgent need to rebuild the New Zealand economy after a period of elevated spending, inflation and interest rates. The Government is on the right track with our plan to drive greater value from public spending, lift educational achievement and give businesses the confidence they need to invest, hire and grow. 

“Our Government’s work to strengthen the economy will deliver New Zealanders the cost of living relief, higher incomes and better public services they deserve,” said the Minister.

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