Treasury unemployment forecasts are at the high end, Prime Minister John Key says maintaining his optimistic approach to the economy.
Treasury warned yesterday that the recession, which started in January 2008, would last at least until March 2010, The Dominion Post reported today.
The outlook was more pessimistic, with unemployment picked to be higher than the previous 7.2 percent worst case scenario - leaving a further 60,000 out of work by next year.
The budget was expected to update the unemployment forecasts and budget deficits. The first eight months of the financial year already showed a deficit of $8.5 billion, an $11.6b turnaround on pre-election forecasts.
The biggest change has been in the fortunes of our major trading partners, which in December were expected to grow by 0.4 per cent in 2009. That has been revised to a contraction of 1.8 per cent.
Mr Key told reporters this morning that there were three possible scenarios and Treasury's figures sat in the middle.
"We just don't know what those (unemployment figures) will look like, as I have said for quite some time I'm not going to predict a level of unemployment, the Government is focusing ... on insuring that we do everything we can to ensure either people stay in their current job or find another job."
Mr Key said the 60,000 figure "looks a bit high to me".
He said there was no question revenue had contracted but it was debatable how that would impact on unemployment. The Government would strive to stimulate the economy, he said.
Mr Key repeated his previous view that the state sector should not expect big pay hikes. Rises would be "at a very low level but it's not true to say there will be a pay freeze".
He said previously negotiated rises would go ahead.
Labour leader Phil Goff said Mr Key and Finance Minister Bill English were sending the wrong message.
"The message that Mr English was giving our front line people, our nurses, our doctors, our teachers, our police officers, our corrections officers, don't expect a pay rise this year," he said.
"On one hand they're saying that they want people to spend more to increase demand, on the other they're saying to all of our civil servants don't expect any pay rise at all. I think that that pre-empts the negotiation round.
"People negotiating this year will have "full regard" for the economic situation, Mr Goff said.
He said many people were under financial pressure and faced rising prices.
"It's not for the Government to come in and say zero pay rise".
Mr Goff said the Government should look at what its ministerial staff were getting and show the same restraint others were facing.
