Obama adviser talks sense on NZ policy mix

The National Party-led government has gained support from an unlikely quarter, with one of US president Barack Obama’s former top economic advisers, Peter Orszag, saying New Zealand is “the only country” implementing a balanced mix of stimulus and austerity policies.

“For most countries it’s better to combine deficit reduction that you put in place now but that takes effect over time, with if anything, additional support, and that means stimulus, for the economy, effective immediately,” said Orszag in a BBC Radio debate during last week’s International Monetary Fund meeting in Tokyo.

“What’s interesting about the fiscal monitor the IMF published … as part of these meetings, is if you look across all the developed countries, there is only one country… which has actually done that, which is New Zealand,” said Orszag. The country had “coupled additional stimulus with medium-term fiscal consolidation. That’s the right policy combination.”

Now the vice-chairman for global banking at Citigroup, Orszag was Director of the Office of Management and Budget through the height of the global financial crisis until 2010.

Despite being six days old, Health Minister Tony Ryall dashed out a statement today seizing on the endorsement as proof that the government is not pursuing austerity policies alone, as its domestic critics charge.

“Orszag opposed the austerity only position taken by the IMF’s Chairman Christine Lagarde, and Wolfgang Schauble, German Minister of Finance,” said Ryall said. “Mrs Lagarde and Mr Schauble said cutting spending was difficult but necessary.

“But Mr Orszag said it was better to take a mixed approach – with stimulus for the economy combined with deficit reduction that is put in place now but which takes effect over time.”

The government had borrowed “to take the sharp edges off recession, at the same time maintaining strong fiscal discipline,” said Ryall, who did not cite the stimulatory tax cuts it pushed through in its first Budget, in 2009, and which its political opponents continue to criticise.

 

http://www.imf.org/external/mmedia/view.aspx?vid=1897632939001