Ganesh Nana: former Productivity Commission Chair on the open letter saying Government policies are dragging out recession

Experts are warning the Government's policies designed to reduce the deficit and bring down inflation are worsening the impact of the recession on households and businesses.

Former Productivity Commission Chair Ganesh Nana has led group of 15 economists who've written to the Prime Minister claiming spending cuts are harming the economy.

Nana explained that fiscal policy should not be targeting inflation.

"We want fiscal policies to do other things, which is to focus on that external debt that seems to be being ignored by many."

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Episode Transcript

Speaker 1 (00:00):
A group of economists have written in open letters of
the Prime Minister asking him not to cut government spending now.
The group includes a former Treasury chief economist, a current
Union economist, a former union economist, and a former Reserve
Bank director and also Garnish Nana who's with us aganash
very well, thank you. What government spending cuts do you
want to see stopped?

Speaker 2 (00:21):
Well, we've we've had the last budget which saw lots
of cuts and spending I think was about six or
seven percent they wanted and the signals are that there
is even more spending coming in this next budget round.
So we want to caught a hole to any more
cuts and spending while we take stock and just where
we are and what is the objective of all of us?

Speaker 1 (00:40):
But don't we want the government to cut spending to
help the Reserve Bank bring down inflation? Sorry, you're cutting out,
I said, don't we worry. Don't we want the government
to cut spending to help the Reserve Bank bring down inflation?

Speaker 2 (00:58):
Well, the Reserve Bank is doing quite well on its own,
assisted by the rest of the world and bringing down inflation.

Speaker 1 (01:04):
The government debt as well.

Speaker 2 (01:05):
Right, Well, that's arguable. But the point is should fiscal
policy be targeting inflation when we've already got the Reserve
Bank doing it. We want fiscal policy to do other things,
which is to focus on that external debt that seems
to be being ignored by many.

Speaker 1 (01:22):
But to be fair, the Reserve Bank has asked, has
asked the government to assist them and in the fight
of inflation. Right, So if the Reserve bank's asking for
that assistance, so they not get it.

Speaker 2 (01:33):
Well, the Reserve Bank has always asked, and that that's
not just this government, that's the previous one, as the
previous Reserve Bank governor as well. But the question is
should fiscal policy be targeting inflation? We've already got one
arm of government targeting inflation, and that's through interest rates.
Where what's left to target the other important things in

(01:54):
the economy that are necessary if we get beyond the
short term cycles and nish tackling the longer term issues.

Speaker 1 (02:02):
What do you if you don't think fiscal policy should
fight inflation, what should fiscal policy do.

Speaker 2 (02:09):
Well? Fiscal policy has got to help us get out
of this rut that we've been in fee decades around
productivity and export growth, because it's that external debt that
is the problem. I know New Zealanders love and governments
of all colors love to talk about government debt, but
we would love to talk about external debt because that
is the legacy and the burden that has literally been

(02:31):
passed on to next generation and so on. And that
external debt is not what we owe to the government
or what the government owes to us. It's what we
as a country owe to other countries. And that's the
important thing. And we don't see any addressing of that
or any con between what fiscal policy is currently doing
and that that bigger target that we need to address.

Speaker 1 (02:55):
All Right, Ginnich, thank you, I appreciate your time. It's
going to on a former Productivity Commission chair for more
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