Confidence on interest rate cuts next year vanishes
Independent economist Tony Alexander says whichever party is elected in October, it will have to tighten fiscal policy and rein in spending because of a deterioration in the Government’s accounts.
The government’s published accounts for the 11 months to the end of May showed tax revenue was more than $2 billion behind where Treasury had forecast it to be at the budget and slow or near-zero growth is expected to deepen this deficit.
The Reserve Bank recently released its predictions for the economy and inflation, including the government's accounts. “This financial year’s predicted deficit was 0.8%, but that has now blown out to 2.3%”, Alexander says.
On top of that, the International Monetary Fund (IMF) has issued a blunt warning that the country is at risk of falling into a deeper recession than the October to March this year recession which it has just climbed out of. It is predicting the country will have the second lowest growth of the 159 countries it monitors – just ahead of Equatorial Guinea.
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