New Zealand deficit spiralling out of control, minister warns

New Zealand Wellington - New Zealand's budget deficit is spiralling out of control as the country enters its sixth-consecutive quarter of economic contraction, Finance Minister Bill English warned Wednesday.

If growth in public expenditures is not checked, the deficits would hit 45 per cent of gross domestic product (GDP) in four years and an unsustainable 70 per cent by 2023, he told business leaders in Auckland.

Observers said the speech clearly paved the way for the conservative National Party-led government to cancel tax cuts for the next two years that it had promised in its successful campaign for election in November.

English said a decision about future tax cuts would be announced in his first budget to be delivered on May 28, but he warned they would only be implemented if the country could afford them.

"The government believes lower taxes will benefit the economy, but we must consider whether they can be afforded in the economic and fiscal environment," he said.

Blaming the former Labour Party administration, which ruled for nine years, for spending budget surpluses on public services instead of cutting taxes, English said the deficit was on course to expand indefinitely by more than 10 billion New Zealand dollars (5.6 billion US dollars) a year.

By 2023, the government would owe 135 billion New Zealand dollars, 100 billion New Zealand dollars more than today, English said.

He said the budget would outline a plan to control debt, which would require tradeoffs. The government was committed to retaining social welfare benefits and improving public services but the rate of new expenditure would be less than in recent years and spending would also be reprioritized, he said.

Meanwhile, the recession was hitting every sector of the New Zealand economy. The Inland Revenue Department announced Wednesday that it was cutting 250 jobs to save money. (dpa)

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