Kiwiblog brings up some great points about the importance of this years budget.
It turns out that the head of Treasury stated that this was the most important budget since 1984. Wow.
So he’s saying that this is more important than the “mother of all budgets“. When National came to power in the early 1990’s they faced threats of a credit rating downgrade and forecasts of huge budget deficits – which forced them to cut spending sharply. In conjunction with HIGH interest rates (even in real terms, we are talking like 8% real!!), a lift in petrol prices because of the gulf war, and weak other commodity prices, this saw the New Zealand economy suffer a huge contraction and unemployment went over 11%.
Now, real economy prospects aren’t quite as bad this time. Unemployment is at 5%, relative to 7% at the start of the 1990’s. Real interest rates are very low (hitting at around 1-2%). Some of our commodities are doing well, and even though some have experienced a sharp fall in price oil prices have also tumbled.
However, obviously there is a feeling that the threat on the currency from government policy is at its highest level since we floated the currency – intense.