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Govt too focused on surplus - expert

Thursday 24 May 2012 7:40 a.m.

Prime Minister John Key has signalled a return to surplus by 2014.

Today's Budget will show us how the Government plans to get the books back in black in just two years, but Berl's chief economist Ganesh Nana believes there is too much emphasis on achieving a surplus.

Mr Nana spoke to Firstline this morning.

“The single focus should be on export income - we should not be detracted by sideshows around debt and deficit – those are the outcomes, the solution is around earning income,” he says.

Mr Nana believes that the general health of the economy will ultimately determine the Government’s return to surplus and encourages growth over austerity.

Mr Nana also believes that international rating agencies are more concerned with the country’s external debt - private sector debt plus the Government debt - rather than just the Government debt.

“In New Zealand’s context it’s that private sector debt that is extremely large and that’s our vulnerability and our concern,” he says.

Mr Nana believes the Government will be worse off after selling state owned assets because the money earned from the sales will not be used to retire debt.

“Rather than sell an ownership stake in those assets, let’s retain that ownership stake with the Government, so the Government continues to get that dividend income. But instead of selling assets sell debt, that is sell debt instruments to New Zealanders, improve their savings options  and rather than having them put those savings in a term deposit with retail banks putting them in a term deposit with the Government.”

Watch the video for the full interview

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