National says Labour divided on fiscal policy - here’s what was said

Wednesday, 21 May 2025

ANALYSIS: Finance Minister Nicola Willis has fired her second salvo in two days at Labour’s top brass over an apparent mixed message on its fiscal policy.

Willis stated in a media release on party letterhead today that opposition leader Chris Hipkins had undermined his finance spokesperson, Barbara Edmonds.

During an interview with The Post, Edmonds agreed the current rule that net core Crown debt should not exceed 50% of GDP is appropriate (it was last measured at 42.6% of GDP as at the end of March).

She also said that remains the appropriate target “unless Treasury, when we come into government gives us advice otherwise”.

Edmonds said she “didn’t resile from previous Labour ministers of finance” that it is appropriate to return to a so-called Obegal surplus by the end of the Treasury’s forecast period, which currently ends in June 2029.

Asked whether returning to Obegal surplus by the year ending June 2029 is an appropriate target, now, she gave a clear “yes”, while making clear Labour would take a different approach to the Government over how to achieve that, criticising for example last year’s tax cuts.

Hipkins appeared more equivocal in a subsequent radio interview, when he declined to commit to the 50% debt cap.

In an attempt to better marry the narratives, Hipkins said Edmonds was talking about the fiscal policy when Labour went into the last election in 2023.

Labour would set out its fiscal plan before the next election and it would be unreasonable for people to ask the party to “crystal ball gaze” that far into the future given there could be two Budgets before then, he said.

Hence Willis’ salvos, which she upped into a full-scale barrage in Parliament on Wednesday by claiming Hipkins had thrown Edmonds “under a bus”.

At the risk of being pedantic, the words Edmonds used were neither simply setting out Labour’s fiscal policy in 2023 — no reporter would trudge up to level 3 in Parliament House to check that in era of internet search engines — nor did they necessarily commit Labour to a particular policy in 2027.

The interview with Edmonds was requested in the wake of a statement from Labour campaign chair Kieran McAnulty that the party was “ready to go” in the event of an early election, on the premise that if that was truly the case, it should have a current fiscal policy that it could articulate.

As such and in her quoted comments Edmonds was clear about what she thought the appropriate fiscal rules are as of right now — not in 2023, nor looking ahead to 2027.

It is reasonable to expect the party to provide its current take, given we are in the run-up to a Budget where both the debt and the delayed return to surplus will be near top of mind for MPs and the public.

As it happens, McAnulty’s comment about Labour being “ready to go” in the case of election appear to have referred to its party apparatus being prepared, rather than it being ready for a policy perspective.

If Labour was fully ready for an election it might be handy for it to have not only a currently articulable fiscal policy but also at least the bones of a tax policy and a policy on reforming the electricity sector, after kicking the tyres on each for 10-plus years.

There are future developments that could make keeping net core Crown debt under 50% of GDP a tough goal for the next government.

One would be if the coalition government buried its head in the sand over the route to meeting the country’s 2030 Paris climate change target for example, potentially landing the next government with a mountain to rapidly climb.

That is one concern Edmonds highlighted last week.

But if Hipkins’ view is that the 50% debt cap and a surplus in 2029 aren’t necessarily appropriate fiscal goals that a government should have right now, well, that would be a big call.

The first is designed to ensure the country wouldn’t default in the event of a major disaster, and the second to ensure they don’t drag their heels getting debt down.

Edmonds’ current support for those rules should be nothing that the party should get into a mix-up about.