Political blame game begins over state of Government’s books

Wednesday, 18 December 2024

The latest treasury reports don't make for great reading for a government that has promised a return to surplus.

The political blame game has begun over the state of the economy, with Government and Opposition MPs pointing the finger at each other.

Finance Minister Nicola Willis has defended the Government’s approach of cutting costs, while Labour leader Chris Hipkins denounced what he called “austerity”.

On Tuesday, the Half Year Economic and Fiscal Update showed debt was expected to grow and returning to surplus was out of reach until 2029.

The political blame game has begun over the state of New Zealand’s economy after the release of the Government’s books on Tuesday.

The Treasury’s Half Year Economic and Fiscal Update painted a tougher economic picture than expected, with debt expected to grow and a government surplus set to remain out of reach until 2029.

Core Crown expenses are forecast to grow from $139b in the year ending June to $162.9b in the year to June 2029.

Labour and National have been blaming each other about the state of the Government’s books.

Tuesday’s update also showed the books would stay in deficit until 2029, after the Treasury initially expected a surplus to arrive in 2028.

Despite the grim forecasts, Finance Minister Nicola Willis defended the approach the Government was taking, saying they had been spending “far less” than the last Government and had managed to find $23b in savings through a series of spending cuts.

Speaking to RNZ on Wednesday, Willis said she could not control Treasury’s forecast assumptions, but said it was now the time for “fiscal discipline”.

“I take responsibility for the fiscal consolidation that needs to occur in New Zealand,” she said.

Finance Minister Nicola Willis has defended the Government’s cost cutting.

Willis added that the Government was working on a set of savings to ensure next year’s budget sat within very constrained operating allowances, saying that the alternative of high levels of spending would burden New Zealanders with an “unsustainable” level of debt.

“Labour did take an approach where they added more than $100b to New Zealanders debt in five years. That approach won’t work anymore.

“We have rejected Labour’s approach, which is to throw caution to the wind and say, ‘let’s just keep borrowing, let’s spend as if nothing has changed’. That is irresponsible, that is reckless.”

Labour leader Chris Hipkins says cutting Government investment is not the answer.

In response, Labour leader Chris Hipkins said the Government was making a bad economic situation worse.

“Nicola Willis seems to be surprised that if you put thousands of people out of work the Government tax take goes down and the unemployment bill goes up. Government decisions have consequences.”

Greens co-leader Chloe Swarbrick says the Government is choosing to prolong the recession.

Hipkins told RNZ that cutting back government investment when the economy was struggling was the wrong move.

“The austerity-type politics being pursued by this Government have been proven to fail elsewhere.”

He added that cutting back on things such as building new state houses and school and hospital upgrades would have real consequences.

“They could have taken the opposite decision and said, when the economy is turning down, that it is really important that we keep building houses and that we keep things moving because keeping people in work is one of the ways that you make a recessionary downturn shorter.”

The Green Party has also criticised the Government’s performance, saying the Half Year Economic and Fiscal Update showed they were failing to address the country’s massive social and infrastructure deficits.

Party co-leader Chlöe Swarbrick said Prime Minister Christopher Luxon was choosing to prolong the recession and kneecap productivity through “merciless cuts”.

“This is the austerity play book: defund public services to failure, watch them fail, then privatise; take the so-called ‘cost’ off the Government’s books and watch those costs rise for regular people,” Swarbrick said.

ACT, on the other hand, said the books had been grim for a long time and that successive governments were to blame.

Party leader David Seymour said his party had been ringing the alarm bells about “wasteful spending” for years.

“The figures are bad, but at least we’ve got a Government that gets it. We must continue to cut waste, keep to tight operating allowances, and climb out of the hole,” Seymour said.