Tough times still ahead - English

Signs the economy may have stopped shrinking do not signal the end of hard times, Finance Minister Bill English said today.

Figures released by Statistics New Zealand today show the economy grew less than 0.1 percent in the June quarter, according to Gross Domestic Production (GDP) figures released today, following five quarters of contraction.

Most economists had picked the data to show further economic contraction and Mr English welcomed the news but repeated his caution about the country's recovery.

"For the economy the worst is behind us, there are still some people who are going to find themselves out of work," Mr English said.

Unemployment generally runs behind the economy and Mr English said it would take another 12 months before those figures showed some improvement.

SNZ warned the growth was so small it could not be seen as a sign of economic recovery and Mr English said even if it was the recession's effects on the economy would be felt for years to come.

Speaking to a public sector management audience today, Mr English emphasised that it would take decades to get Government debt under control and they would have to tighten their belts.

"I believe the impact of this recession will continue to be felt on the Government's books for 30 years."

From 1992 it had taken 16 years to get high levels of Government debt down to where they were in 2008 and it would be the same this time around.

The Government was currently doubling its debt by 2014 by borrowing $40 billion.

The economy would in 2012 be $50 billion lower than it would have been had the global financial crisis not taken place and this meant collecting $16 billion less tax revenue.

Borrowing at that level could not continue and spending had to be brought under control.

"Lifting the performance of the public sector while reducing the rate of spending increases, is one of the Government's six policy drivers for the next three to five years."

This meant no or little new money for pay rises over that period.

Public sector pay rises were not going to be impossible, but they would be difficult.

Mr English called for the reduction of duplicated services and more sharing of resources in the public sector.

In the speech Mr English said there were more than 600 government websites and numerous 0800 lines with at least two agencies having about 20 toll free lines.