Cullen fails simple maths test

Finance Minister Michael Cullen told hundreds of thousands of radio listeners that the unemployment queue would grow by an alarming 20,000 people by the end of the year.

A few hours later the normally unerring Dr Cullen said he had made a mistake, but admitted that an extra 8000 people would be unemployed by March next year.

Dr Cullen's staggering employment-rate blunder comes in a week when sensitivities are high about a possible escalation in the unemployment rate after more than 340 people were made redundant across the country.

Business confidence is also dropping in the face of the expected economic slowdown with Treasury forecasting that economic growth will bottom out at 1.7 per cent in March next year.

The Government has been working hard to alleviate fears of a sharp economic slowdown, describing it as a "dip in the business cycle" and have stressed that New Zealand has the lowest unemployment rate in the developed world.

Dr Cullen made the gaffe on Newstalk ZB's Paul Holmes Breakfast show - one of the country's most popular radio programmes, listened to by 200,000 people each morning. Holmes asked Dr Cullen how many jobs would be lost by the end of the year.

Dr Cullen replied that Treasury had forecast unemployment would rise from its current level of 3.4 per cent to 4.5 per cent by the end of the year and went on to say that equated to an extra 20,000 people who would be unemployed.

Yesterday afternoon, Dr Cullen told journalists attending a speech he was giving at the University Students' Association conference that he had made an error on the radio show.

"I made a mistake in terms of my timing and set of assumptions around the change to the unemployment rate."

Dr Cullen said Treasury had forecast unemployment would rise by 0.4 per cent to 3.8 per cent in March next year. "You can work out that the number of people counted as unemployed would rise by something like 8000."

Treasury forecasts show unemployment is not expected to reach the 4.5 per cent that Dr Cullen quoted on the radio until 2010.

National Party finance spokesman John Key said it was "sloppy" for Dr Cullen to have made the mistake.

"The economy is bracing itself for a major downturn which could have significant impact on employment for New Zealanders, so for the Finance Minister to make this mistake shows that not only is he not on top of his game, but it is worrying that he would make such an error."

Mr Key said National believed about 10,000 extra people would be unemployed by the end of the year.

Dr Cullen stressed that 8000 was the number of people by which unemployment would rise, not the number of people who would be made redundant.

Mr Key said Dr Cullen was playing with numbers. "I think he is being a bit disingenuous. The truth is thousands and thousands of New Zealanders are very likely not to have a job at the end of the year."


Unemployment

Treasury's unemployment rate forecasts:
2006: 3.4 per cent
2007: 3.8 per cent
2008: 4.1 per cent
2009: 4.3 per cent
2010:4.5 per cent