Everyone’s promises crash into fiscal reality

Friday, 10 July 2026

OPINION: “National’s transport promises hit reality,” chortled Labour’s transport spokesperson Tangi Utikere on Thursday, and understandably so.

Even before the era of ultra-low finance costs during Covid, National has talked a big game about getting on top of New Zealand’s infrastructure crisis, led by its signature Roads of National Significance (RoNS) policy.

John Key’s transport ministers - Steven Joyce, Gerry Brownlee and Simon Bridges - brought us the original RoNS programme, but their government had inherited effectively zero debt from Labour’s Michael Cullen.

As Key observed all those years ago, New Zealand didn’t have a debt problem, it has a growth problem, and his Government argued that borrowing for projects like ultra-fast broadband (UFB) and the RoNS would turn that around.

The country would almost certainly now be much worse off without UFB and RoNS, but productivity growth and GDP-per-capita have nevertheless remained much flatter than hoped.

During Covid, when governments could borrow almost for free, current Transport Minister Chris Bishop - who worked for both Joyce and Brownlee and has been National’s infrastructure guru ever since - became even more ambitious. Bishop was the mastermind behind then-leader Judith Collins’ $31 billion, 10-year transport and infrastructure policy, announced in July 2020, aimed at resolving Auckland’s congestion crisis and transforming the Upper North Island’s supply chains.

If only New Zealand had had the wherewithal back then to direct the $88b then-Finance Minister Grant Robertson borrowed in gross terms between 2017/18 and 2023/24 to those projects - and even to making Jacinda Ardern’s KiwiBuild and light-rail project actually happen - than to wherever Robertson’s billions ended up instead.

But times change. Back in mid-2020, the Treasury could borrow at around 0.8%. It now needs to pay at least five times as much when issuing new bonds, and no one can yet see a time that is likely to change.

If the cost of a permanent asset like a road is essentially its long-term financing cost, then every new road now costs at least five times as much as it would have had it got started when Bishop and Collins unveiled their big 2020 plan.

What’s more, with current Finance Minister Nicola Willis already having put another $47b on Robertson’s pile of gross debt - and projected to add yet another $62b on top of that by the end of the decade - Bishop faces an altogether different fiscal position than any of his predecessors since 2008.

As Labour says, he has had to face reality and it is to his and the Government’s credit that they finally have.

The six RoNS that still have definitive start dates are also well chosen. Wellingtonians and Cantabrians and others outside Auckland and Northland may think there is still much more to do in their regions. But it is Auckland’s network that still remains a disaster and Northland - the second-poorest part of the country behind only the South Island’s West Coast - that is most in need of better connectivity with its major market.

However controversial the Key Government’s Waikato Expressway was at the time, it and other projects in the region have created the so-called Golden Triangle of Auckland, Hamilton and Tauranga, effectively establishing one economy and populace.

With the possible exception of Treaty of Waitangi Negotiations Minister Paul Goldsmith completing the much-delayed historic settlement with Ngāpuhi, properly connecting Whangārei and beyond with Auckland, Hamilton and Tauranga is probably the single biggest thing the Luxon Government or its successors could do to help raise productivity and address entrenched poverty. Ideally, both will get done in a second Luxon or Hipkins Government.

But Bishop isn’t the only one whose promises have crashed into fiscal reality. At an average of $40 million a year over four years, Labour’s SolarSaver policy launched the day before his U-turn was probably at the upper limit of what parties can credibly promise for individual initiatives if they want to be taken seriously in the face of massive ongoing cash deficits and exploding gross debt.

Labour has already spent all the money it says it expects to raise from its new capital gains tax and insists that is the only major new revenue measure it plans.

Wearing her National Party finance spokeswoman hat, Willis has been trying for nearly a month to get traction for her claims that there is an $18.2b gap between what Labour is promising to spend and the new revenue it plans to raise. She hasn’t got far yet, since allegations of “fiscal holes” have been thrown too liberally across the political aisle in recent elections.

Moreover, Labour finance spokeswoman Barbara Edmonds - a known admirer of Cullen’s conservative fiscal approach - deserves the benefit of the doubt. She has followed the conventional practice of promising to publish a full fiscal statement some time after Treasury releases the Pre-Election Economic and Fiscal Update on September 29 and before overseas voting starts on October 21.

That would normally be accepted as good enough but, under the current circumstances, Edmonds had better be aiming for closer to the first date than the second.

Right now, in the best traditions of oppositions, Labour is cynically trying to have it both ways. It is promising to set up a new Future Fund with dividends from government-owned companies but has not indicated how or whether it would fill the $2.8b deficit it looks like that would create in the Crown accounts over four years.

It continues to tell fearful Wellingtonians, worried they will be restructured out of the public service, that it opposes Willis’s efficiency drive but won’t say how it would fund its reversal, which would cost another $2.8b.

The Government’s controversial changes to the pay equity scheme in last year’s Budget continue to be condemned publicly by Labour as an attack on women, but no one believes it would really find the $11b to reverse them.

Other Labour promises on Willis’s list aren’t as expensive but they all add up.

Willis is obviously playing politics over the alleged $18.2b funding gap, but that’s part of her job and she has raised a legitimate point. It is an election year, after all, and, according to the polls, both she and Edmonds have roughly a 50:50 chance of being finance minister at Christmas.

Edmonds could protect her reputation with centrist voters and the business community as a Cullen-esque fiscal conservative if she quickly admitted the big ticket items on Willis’s list have no more chance of happening under a second Hipkins Government than the original list of Bishop’s RoNS. Fiscal reality applies to everyone and Labour can’t expect the chortling to go only one way.

Matthew Hooton is Editor-in-chief of The Post