Deficit cuts may get harder

Press, 1 August 1989, Page 7

Deficit cuts may get harder

Wellington reporter The Government is running out of easy ways to cut the Budget deficit, the

New Zealand Institute of Economic Research says in its post-Budget comment.

Tax reform had brought increases in revenue each year since 1984. However, this was coming to an end, and would limit revenue growth in future, the institute said.

Against this, the Government’s own estimates showed the financial deficit — which excludes asset sales and State corporation debt repayments — would expand to 1.6 per cent of gross domestic product in two years if no action was taken. The Government has promised to produce a financial surplus for the first time next year.

In his comment on the Budget, the economist for DFC New Zealand, Ltd, Mr Roger Garrett, said hard decisions on Government spending were “still not forthcoming” in this year’s Budget. “Whatever the approach, the Government will find it difficult attaining the required fiscal savings to realise a financial surplus,” he said. Spending cuts seemed to be channelled into extra welfare spending. The N.Z.I.E.R. predicted that improving economic growth would help cut unemployment benefit and other social spending, while higher earnings and company profits would lead to larger tax collections next year., The Minister . of Finance, Mr Caygill, said yesterday the Government recognised ; the , need to find new ways to reduce the deficit j