Pre-election Economic and Fiscal Update – economy “better than predicted”

The Pre-election Economic and Fiscal Update has been released today. Minister of Finance Grant Robertson’s take on it:


  • PREFU shows economy doing better than forecast
  • Unemployment to peak at 7.8%, down from 9.8% forecast in the Budget
  • Year-to-June accounts show tax revenue, debt and OBEGAL better than forecast
  • Global forecast downgraded as COVID-19 second waves and uncertainty grows
  • Balanced plan to support critical public services, manage debt and reduce the deficit caused by COVID-19

The Pre-election Economic and Fiscal Update released today shows that the near-term economic recovery has been stronger than the Treasury and many economists predicted at the May Budget, as the economy bounced back strongly out of lockdown.

“The Treasury now forecasts the unemployment rate to peak at 7.8%, down from 9.8% forecast in the Budget, because the economy is stronger than expected. That compares to an expected peak of 10% in Australia, while countries like the US and Canada have already recorded unemployment peaks above 13%,” Finance Minister Grant Robertson said.

“The unaudited Crown accounts for the year to 30 June 2020 back up the evidence of a rebounding economy, with core Crown tax revenue of $84.9 billion coming in higher than the $82.3 billion forecast, indicating more activity than expected.

“Net core Crown debt was 27.6% of GDP at 30 June, compared to the Budget forecast of 30.2%, and the OBEGAL deficit of 7.7% of GDP at 30 June was lower than the 9.6% forecast.

“These are signs that the New Zealand economy is robust, and that our plan to eliminate COVID-19 and open up the economy faster is the right approach. We can see this in the forecasts, with the New Zealand economy predicted by the Treasury to grow by an average of 4.2% across 2021 and 2022, compared to Australia at 3.6% and the US at 3.5%.

“The Treasury – similar to other economists – initially forecast June quarter GDP to fall by about 23.5% in June from March. In today’s forecasts, the Treasury has reduced that to 16%. All this goes to show is that forecasting month-to-month, let alone years in the future, is incredibly difficult with such an uncertain global environment and an unpredictable virus.

“However, global headwinds and this 1-in-100 year economic shock caused by COVID-19 will have a long-term effect on the Government’s books.

“The forecasts illustrate our balanced plan to manage debt and reduce the deficit caused by COVID-19, while protecting our investment in services like health and education.

“COVID-19 is hurting economies around the world but because New Zealand went into this with low debt and a growing economy, we will come out better than other advanced countries,” Grant Robertson said.

“Policies like the Wage Subsidy, business tax refunds and small business cashflow loans protected jobs and kept businesses going. We’ve also invested to secure PPE and ventilators, and make sure our testing and contact tracing systems are world-class. Taking on debt to fund this response is the right thing to do as we fight COVID-19.

“There is no free lunch here.These measures require significant investment. It has been necessary to use the Government’s strong financial position to do this.

“What counts is our strong track record. Before COVID-19, despite constant urging to the contrary we stayed disciplined with our spending and reduced debt below 20% of GDP while successfully investing in critical public services.

“Our strong starting position that means even at its peak of around 56%, New Zealand’s net debt will be considerably lower than other economies around the world – advanced economies went into COVID-19 with net debt averaging about 80% of GDP.

“The PREFU’s long-term projection model shows debt reducing to 48% of GDP by the end of the projection period. The difference between debt of 56% and 48% at the end of the projection period represents $46 billion less debt than if debt just remained at its peak.

“The projections show the deficit caused by COVID-19 reduces steadily each year from 10.5% of GDP this year, to less than 1% of GDP by June 2028.

“The PREFU also shows the benefit of locking in low interest rates for the long-term debt that has been used to fund the response, with annual core Crown finance costs forecast to reduce by around $800 million over the next four years.

“Because the Government can borrow for 20 years or longer at rates below 1%, it makes sense to lock these in now to fund the response before interest rates rise. Because the Treasury has already been able to secure more funding at lower rates, and because the Government’s cash position has improved since the Budget, the Treasury today announced it has reduced its debt programme over the next four years by $10 billion.

“There are challenges ahead, but we have a five point plan to grow the economy, support businesses and seize the opportunities created by our world-leading COVID response.”


While the economy may not be as bad as predicted the effects could have been delayed and may be yet to bite. Or not.

The Government drip feed of spending announcements

National spokesperson for finance Paul Goldsmith is nudging Minister of Finance Grant Robertson on the drip feeding of spending announcements.

Usually most spending is signalled in budgets – this year’s budget was published in mid-May, but unusually, due to the Covid pandemic, a there was a lot of additional spending plus $20 billion not allocated to anything specific.

Obviously spending on measures related to Covid would have to be announced and that would happen gradually as needed. But like $1 billion a year Provincial Growth Fund it leaves open perceptions and allegations of election campaign assistance.

Every Government times announcements they think will be favourable to their chances of re-election, it is a major benefit of incumbency. But most spending is signalled in the election year budget.

In Parliament’s Question Time yesterday:

Hon Paul Goldsmith: Does he stand by his response to my question on Tuesday, which asked how much additional spending he had so far planned to announce before the general election in September, “As the member knows, the Government has been very flexible all the way through our response to ensure we meet need as it arises, but I don’t have any specific plans in that regard.”?

Hon GRANT ROBERTSON: I stand by all of the statements I made in that answer, and I think the member’s impression wasn’t too bad just then.

Hon Paul Goldsmith: How did he not have any specific plans for new spending on Tuesday and then have his Government announce $400 million of new spending on Wednesday?

Hon GRANT ROBERTSON: The basis of that spending was in the Budget and the COVID-19 Response and Recovery Fund announcements we made.

Hon PAUL GOLDSMITH: Does he think he can just dismiss questions about his intentions for billions of dollars of spending?

Hon GRANT ROBERTSON: No, and I haven’t.

Hon Paul Goldsmith: Can he assure New Zealanders that he’ll keep a substantial part of the $20 billion spare from the COVID fund as a contingency in the case of a later outbreak?

Hon GRANT ROBERTSON: I, in fact, talked exactly about that when I announced it on Budget day.

Hon Paul Goldsmith: How long is he planning to keep up his average of announcing $200 million of new spending a day since the Budget, and how does he think New Zealand will pay for it?

Hon GRANT ROBERTSON: I would have to go back and look at the figures that the member has just put forward there. What we have done throughout the last 2½ months or so is what New Zealanders wanted us to do, which is cushioned the blow of this virus on both our economy and our society, and we will keep doing that.

On Wednesday:

Govt boosts innovation, R&D for economic rebuild

New Zealand’s entrepreneurs, innovators and crown researchers will benefit from a $401.3 million funding boost through Budget 2020 and the COVID Response and Recovery Fund to help deliver jobs and a stronger economy in a post-COVID world, Research, Science and Innovation Minister Dr Megan Woods said.

Free period products in schools to combat poverty

During term 3, the Ministry of Education will begin providing free period products to schools following the Government’s $2.6 million investment. The roll-out will begin at 15 Waikato schools and be expanded to all state and state-integrated schools on an opt-in basis in 2021.

“Our plan to halve child poverty in 10 years is making a difference but there is more to do and with families hit hard by the COVID-19 global pandemic, it’s important to increase that support in the areas it can make an immediate difference.

Free period products to schools seems like a worthwhile initiative but it has been campaigned for by the Greens for some time and it seems very loosely connected to Covid.

Thursday:

An iconic New Zealand tourism attraction and the country’s 31 Regional Tourism Organisations are the first recipients of support from the $400 million Tourism Sector Recovery Plan, to help position the sector for recovery from COVID-19, Tourism Minister Kelvin Davis announced today.

Sport and Recreation Minister Grant Robertson has welcomed the first release of funds from the $265 million Sport Recovery Package announced as part of Budget 2020.

It will be difficult for Goldsmith and the Opposition to pin specific spending more on electioneering than being necessary, but the COVID Response and Recovery Fund decisions should be scrutinised.

Modifications to the wage subsidy scheme

Beehive: Further steps to protect New Zealanders’ jobs

The Government has made modifications to the wage subsidy scheme to ensure people don’t lose their jobs during the national lockdown.

These changes will soften the impact of COVID-19 on workers, families and businesses, and position them to exit the lockdown and look to recovery, Finance Minister Grant Robertson says.

The modifications focus on keeping businesses and workers connected during this unprecedented time. They apply from 4pm today, and include:

  • Businesses accessing the scheme must still undertake best endeavours to pay employees 80% of their pre-COVID income. Where that is not possible – in particular where a business has no activity whatsoever due to the shutdown and workers are not working any hours – they must pass on at least the whole value of the wage subsidy to each affected worker.
  • Businesses must undertake to keep employees in employment for the period of the subsidy.
  • We are folding the previous sick leave scheme into this scheme to prevent double-dipping. The original sick leave scheme was designed when few people were in self-isolation, and it is no longer fit for purpose. We are working on arrangements for those in essential work who require sick leave due to COVID-19.

The Treasury now estimates the financial cost of the scheme will be between $8 billion and $12 billion depending on uptake by businesses.

“These modifications are about keeping New Zealanders currently at home in lockdown connected to the job they were in on Wednesday before it started,” Grant Robertson said.

“This ensures businesses not able to operate do not need to lay off staff. Even if this requires businesses to operate with no activity, the subsidy allows them to keep their workers on the books, particularly during Alert Level 4.”

The wage subsidy is a Government payment to help employers pay wages. It does not change any other employment law obligations, meaning employees must be paid appropriately under their employment agreements for the hours they do if they work during the lockdown.

“We are running this scheme on a high-trust model in order to get money out the door and support the workers, families and businesses who are affected by COVID-19. We are also preparing an appropriate audit process that will act as a backstop for this high-trust model,” Grant Robertson said.

The wage subsidy is $585.80 a week for full-time workers (who worked 20 or more hours per week before COVID-19) and $350 a week for part-time workers (fewer than 20 hours). It will continue to be paid out in a lump sum covering the 12 weeks, meaning a $7,029.60 payment per full time worker.

“Demand for the scheme is high, with $2.7 billion already paid out for 428,768 workers. I want to place on record my appreciation for the Minister of Social Development, Hon. Carmel Sepuloni, MSD CEO Debbie Power and all their team for the incredible work that has made this happen.

“People are working hard to respond and process applications as fast as they can under challenging conditions. Please be patient when applying, and please be kind to each other,” Grant Robertson said.

Expansion of the wage subsidy scheme comes on top of a range of support measures for Kiwis during this global pandemic, including:

  • The $500 million increase to public health funding for the immediate response.
  • A six-month deferred mortgage scheme for home-owners affected by the virus, so people don’t lose their homes due to COVID-19.
  • The $6.25 billion Business Finance Guarantee, and business tax measures to support cashflow, and help businesses continue to operate.
  • A doubling of the Winter Energy Payment so older New Zealanders can stay warm during winter.
  • Main benefit increases, and
  • Rent freezes and a ban on terminations of tenancies/evictions other than in exceptional circumstances.

Economic decisions as NZ readies for Alert Level 4 in COVID-19 fight

From the Ministers of Finance and Social Development:


The Government is announcing significant further support for the economy, workers and businesses as the country unites to prepare for Alert Level 4 in the fight against COVID-19.

Cabinet today agreed to remove the cap on the Government’s wage subsidy scheme, which will inject a further $4 billion into the economy over the next eleven weeks.

In addition:

  • The Government is expediting urgent work on new income support measures for all workers above and beyond the wage subsidy scheme, to be appropriate for how the economy will operate under Alert Level 4.
  • The Government, Reserve Bank and retail banks have agreed in principle to significant temporary support for mortgage holders and a business finance guarantee scheme for those impacted by COVID-19 as the country moves towards Alert Level 4. The details of this will be announced in the next few days.
  • Cabinet has agreed to freeze all rent increases and to look to extend no-cause terminations to protect people during this difficult time.

“We have a chance to beat this virus as we step up our public health response. We know this will have significant impacts on the economy, and we are doing what it takes in response to this rapidly changing situation,” Finance Minister Grant Robertson says.

“These significant measures – along with previous moves to raise benefits and tax changes to support cashflow – are focussed on cushioning the blow for workers and businesses as we respond to this unprecedented global crisis. As we have said before, we cannot guarantee to stop all job losses, but we are doing our best to cushion the blow.”

As this crisis evolves, we are moving rapidly to support New Zealanders.

Now that many New Zealanders may not be able to go in to work for the next few weeks, our priority is ensuring they continue to receive some form of income through this period.

All employers affected by COVID-19 will now be able to apply for the existing subsidy to support the wages of all of their workers.

The changes mean the forecast cost of the wage subsidy scheme is being lifted from $5.1 billion to $9.3 billion. This assumes 50% of businesses access the 12-week scheme.

“The $9.3 billion is an estimate, not a cap or a floor. This means the support will be there to meet the demand. We are doing what it takes to put support in place for workers and businesses.

“We can do this because New Zealand is one of the best-placed economies in the world to deal with COVID-19, due to our low Government debt and strong economic fundamentals going into this global crisis,” Grant Robertson said.

MSD will do its best to get payments out the door as quickly as possible, Minister for Social Development Carmel Sepuloni said.

“But we ask that people have patience and show a little kindness to staff there who are working as quickly as they possibly can. A payment system of this magnitude is unprecedented in New Zealand.”

Wage subsidy scheme – Cabinet decisions on 23 March:

A number of other important changes are being made to the scheme:

  • The previous $150,000 cap is being lifted, so that all employers can access the full payments to subsidise each of their workers’ salaries.
  • New businesses (eg. that are less than a year old) and high growth firms (eg. firms that have had significant increase in revenue) are also eligible. They need to demonstrate the revenue loss assessment against a similar time period, for example a 30% loss of income, attributable to COVID-19, in March 2020 compared to January 2020.
  • Self-employed people with variable monthly incomes are eligible if can demonstrate the revenue loss assessment against the previous year’s monthly average (eg. 30% loss of income attributable to COVID-19 comparing March 2020 to the average monthly income in the period March 2019 to March 2020).
  • The scheme does cover registered charities, non-governmental organisations, incorporated societies and post-settlement governance entities.

Other criteria still apply, including the 30% revenue reduction and for businesses, on their best endeavours, to maintain their named employees at 80% of their pre-COVID income. The same twelve-week period applies to the wage subsidy scheme. The new criteria will apply from midnight tonight.

Crown accounts surplus, more pressure on spending booost

From the Beehive (Minister of Finance Grant Robertson): Govt accounts in surplus, debt remains low

The Government’s books are in good shape with the accounts in surplus and expenses close to forecast, Finance Minister Grant Robertson says.

The Treasury today released the Crown accounts for the five months to November.

The operating balance before gains and losses (OBEGAL) was above forecast by $0.7 billion resulting in a surplus of $100 million.

The variance is due to lower than forecast Core Crown expenses and higher than forecast revenue.

“While the month by month results do tend to fluctuate due to tax timing changes, it is pleasing to see this positive result,” Grant Robertson says.

“The surplus and low levels of debt show the fundamentals of the New Zealand economy remain strong.”

Net debt remains low at 20.1% of GDP, while expenses were within 0.6% of forecast.

Net investments gains of $3.6 billion were $1.3 billion above forecast, largely because of favourable changes in market prices.

“Our careful fiscal management has resulted in low government debt, which alongside record low borrowing costs has given us room to invest an extra $12 billion to future-proof New Zealand,” Grant Robertson says.

“This package of infrastructure projects will provide further support to boost the New Zealand economy in the face of slowing international growth and global headwinds.

“It will also give certainty to the construction industry about upcoming infrastructure projects and will create more opportunities for Kiwis.

“We’ll be announcing the specific projects in the near future,” Grant Robertson says.

I think we can expect some election year spending announcements on top of the proposed large spend on more infrastructure.

It will be interesting to see if they adjust the personal tax rates – part of the reason for rising revenue is tax bracket creep.

Grant Robertson has been a relatively low profile and uncontroversial finance minister, with most criticism coming from the left who want a lot more Government spending.

Like: Borrow, build, hold says Green co-leader

Government should hold onto the houses it has pledged to put out on the open market, Greens co-leader Marama Davidson says.

The Government taking on more debt for public housing would open up more opportunities than fully funding existing programmes like the Auckland Housing programme.

Davidson said a reluctance to ditch the Budget Responsibility Rules and take on debt is the reason those houses aren’t being provided to low-income tenants as part of a mixed tenure development scheme.

“We’ve got low borrowing rates, we’ve got expensive land, the Crown can borrow money. It can hold onto more of the houses it is building right now.”

Stuff:  Green Party scrap Budget Responsibility Rules

The Green Party is ditching its commitment to the restrictive Budget Responsibility Rules, which set targets for lowering government debt and spending.

The Greens first signed up to the rules ahead of the 2017 election while teaming up with Labour.

Labour retained a commitment to the rules, while signalling it wanted to somewhat loosen them next term.

So they may not move much on this until after this year’s election, if Labour and Greens get back into government, and NZ First don’t demand most of the extra spending.

Government to borrow more, boosting spending on ‘infrastructure’

Minister of Finance Grant Robertson has announced that the Government will take advantage of low interest rates and borrow more so they can increase spending in infrastructure. Details will come later.

RNZ: Government signals big new infrastructure spend, looser purse strings

Finance Minister Grant Robertson flagged extra spending in his speech to the Labour Party’s annual conference in Whanganui.

He said Cabinet had committed to a boost to infrastructure as part of the short to medium term spending plan.

“We are currently finalising the specific projects that the package will fund but I can tell you this – it will be significant.”

The government had heeded the calls from the construction industry for “greater certainty” about the pipeline of transport projects from 18 months’ time, he said.

“We will give that certainty”.

It made sense to take advantage of low government debt and the very low cost of borrowing, said Mr Robertson.

“Right now, we can borrow at an interest rate of 1.3 percent for ten years. Just think about that for a minute – when we came in to office, this was up at 3 percent,” he told delegates.

“We have the lowest borrowing costs in New Zealand’s history, so it is time to invest.”

There will be no details until the next update on the government books – the Half Year Economic and Fiscal Update on December 11 – when Mr Robertson will release more details about the areas of spending, and the price tag.

Greens are keen (they have been wanting this for some time):

It should give the economy a good boost for election year. A first term Government overseeing and stimulating a thriving economy will be hard to defeat.

Grant Robertson on Newshub Nation

Minister of Finance Grant Robertson was interviewed on Newshub Nation yesterday.

First, the sideshow.

imon Shepherd: It’s the highlight of the political year, for the government and one man in particular, the Finance Minister. I asked Finance Minister Grant Roberson if he was disappointed that the unauthorised early release of budget details overshadowed his first wellbeing budget. 
Robertson: I don’t think that it did. The reaction that we’re getting from New Zealanders to the budget is that they’re really pleased that we’re focused on a big, long-term issue like mental health. I don’t think New Zealanders are focused on the political games in Wellington.
But there were so many of them. There was the leak of the documentation, the allegations of a hack — you sort of seemingly linking the National Party to that, and then it wasn’t a hack. It was shambolic.
Look, I’ve expressed my disappointment in the fact that the Treasury system could be infiltrated this way and also that the Treasury didn’t do more to find out what had happened before they referred it to the police. The reality is that that’s now in the hands of the State Services Commissioner, who is doing an inquiry, and we’ll await the outcomes of that.
Well, how do you think you handled it all?
Look, I invite you to put yourself in my shoes. On Tuesday night the Chief Executive of the Treasury arrived in my office and said about an hour ago I have referred to the police 2000, of what he called, hacks into the system. I said to him, ‘Do you know how that’s happened?’ He said, ‘No, I don’t.’ I said, ‘Do you know if any other areas of the Treasury system have been compromised?’ He said, ‘No, I don’t.’ So at that point, I’m going to take that matter pretty seriously. That’s what we did. Obviously more information has now come to light. That’s what the inquiry will cover.
Do you think you acted too quickly? Do you think you should’ve waited and got some more information before you put out that press release just then, which seemed to indicate that National was linked to the allegations of a hack?
Like I say, I think most people in my shoes, having received the information I did, would react and say, ‘Well, we need to make sure, regardless of how the National Party might’ve got the information, that they were aware of what the Treasury had advised me. We all now know that the situation is somewhat different. The inquiry will look into how that happened.

Then the meat of the topic.

You named it the Wellbeing Budget, but mental health aside, what is actually transformational about it?
I think the work that we’re doing in domestic and sexual violence is absolutely transformational. We’re talking there about breaking a cycle that has bedeviled New Zealand for many years. $320 million going into that. We’re going to transform the lives of people who are on benefits by indexing that to the average wage. That’s going to lift their incomes consistently.
Okay. Well, let’s talk about that. Obviously the Welfare Expert Advisory Group said 12-47 per cent boost to benefits is needed, something like $5 billion. You didn’t go near that. You’ve done $300 million. Why not?
Well, because we’re doing this in phases. And we’ve actually done three things —we’ve done, not only the indexation of benefits, but we’ve also lifted the abatement rate — the rate at which your income drops if you’re working while you’re on a benefit. And we’ve got rid of the sanction that was on mothers who didn’t identify the fathers of their children. That’s stage one. We absolutely acknowledge that there’s further work to do in this area.
Do you think that you missed a chance to be transformational by not implementing a capital gains tax?
Well, as you well know, I would’ve like to have implemented a capital gains tax. That, of course, would not have come into force until after the election. That was always the plan, but the realities of coalition government are we didn’t have the numbers for that.
What about a greater focus on business? If you lift them and provide incentives for business, that changes the whole economy, doesn’t it? So why didn’t you do that?
Well, we are. There’s a great deal of focus on supporting business. One of the things I’m really excited about in this budget is the $300 million fund for venture investment in those businesses that have got past the start-up phase and are looking to grow to be international companies, and Peter Beck from Rocket Lab has raised this issue with us and said, ‘Too many of these companies head offshore because there isn’t investment here.’ The government’s now got $300 million of skin in the game.
But I would say to you, that this country is made up — the backbone — is small to medium enterprises, and the businesses you’re talking about there are start-ups that want to go internationally. You’re not addressing the small to medium enterprises.
Well, I’d argue we are. The biggest issue raised with me by business is skilled staff, infrastructure, making sure we get those trade agreements going so people can export. They are the issues we are working on.
Could you have been more transformational if you’d relaxed your debt rules earlier? Is there a chance you could look back at this and say, ‘I wish I hadn’t played it so safe’?
It’s always about a balance. We have to make sure that we do keep our debt under control. We’re a small country. We’re susceptible to significant economic shocks and natural disasters. We are actually borrowing more money in this Budget. The economy is growing as well. That means the percentage of GDP stays steady, but we are borrowing to invest in those areas like infrastructure, building up KiwiRail, building more schools and hospitals. But it is all about a balance, and I think we’ve got it right.
Well, what about the balance — you’ve just mentioned shocks like natural disasters or international shocks. You are actually borrowing more. You are running down the projected surpluses. Are you leaving us vulnerable to something like that?
No, I don’t believe so. I mean, we still have a surplus of $1.3 billion here. We still have debt at a relatively low level. We are creating that balance, but we made a decision in this Budget to spend more than we had originally allocated, and that’s because the need was there. The need was there in infrastructure, but the need was also there in services like mental health. We always said, Simon, is that a sustainable surplus would be one where we’d met the needs that were there, so therefore this Budget that surplus is a bit lower, but it still exists.
Are you meeting the health needs though? Because National’s Amy Adams points out that policies for midwives, no free health checks for seniors, reduced GP fees — those kinds of things are not addressed in this particular budget. And in fact, figures from the Child Poverty Action Group show that spending on public health is forecast to be the lowest in a decade by 2023.
Well, what we’ve done is prioritise mental health, and we’ve been completely upfront about that from day one. We have a mental health crisis in New Zealand. It’s been ignored, but there’s still significant resources going into the rest of our health system, around $2.9 billion into supporting DHBs, more money for ambulances. There are other areas, within our coalition agreement, within our confidence-and-supply agreement that we’ll look to address in next year’s Budget, but we made mental health a priority.
Such as?
Well, you’ll have to wait till next year.
What about teachers, though? They’re crying out for some more love from the government, and they’ve just announced more disruptive action. So why couldn’t you address that in this Budget?
We believe we’ve got a fair offer on the table, the $1.2 billion offer. The Budget also addresses some of the non-pay-related issues that teachers have been raising. Six hundred learning support coordinators for what we used to call special ed. 2480 more teachers—
And yet they’re still unhappy?
Well, that’s the reality of the world. What I hope is happening, and I’m pretty sure it is happening right now, is that the Ministry of Education and the unions are sitting down together to say, ‘Look, how can we resolve this?’ We want it resolved. We understand the frustration of teachers after 10 years of not getting supported. Let’s take these first steps together now.
What is there in this Budget for middle New Zealanders? Sort of, those low to middle income families. There doesn’t seem to be anything.
Well, I’d give you one example. We’re removing school donations for decile one to seven schools.
But in the hip pocket there’s nothing like tax bracket creep or anything like that.
Well, look, we’ve made a commitment not to change tax rates in this term of government because we believe that we need the resources that are there to meet the needs that are there.
Well, let’s talk about housing. There is nothing actually, really, apart from the Housing First — the transitional housing — there’s nothing else for housing in this Budget. You’ve got KiwiBuild, which has stalled at the moment because it’s not delivering.
We put $2 billion in last year’s Budget for KiwiBuild for the life of the programme—
And it’s not delivering.
And as you know, there is a housing reset coming forward, and actually in the Budget documents we state that we’ve put some money aside to help manage that housing reset.
How much?
You’ll see the details of that when the reset’s released.
What about the policies that you agreed with the Greens, like a shared equity scheme to get more people to be able to afford to buy into our houses. What happened to that?
As I say, you’ll have to wait for the housing reset that Minister Twyford’s going to announce, but clearly we’ve got a large-scale building programme for housing that’s not just about KiwiBuild. It’s about state housing, transitional housing. Mr Twyford’s now going to come back with that reset, and you’ll be able to see—
But there’s 11,000 people on the state housing list, and there’s nothing extra in this Budget for them.
Well, we made a significant investment in the building of 6000 state houses in the last Budget. We’ve got an integrated programme with transitional housing and affordable housing. Phil Twyford’s going to announce a housing reset. We’ve set some money aside to support that.
What would you say to business-owners, teachers and say, middle income, low-income earners — some of those feel left out by Budget 2019. What would you say to them? What hope will you offer them for next year?
Look, I’ve always said that the three budgets of this term are a trilogy. Last year we did the foundation-building of making sure we got spending back into those core areas. This year we’ve targeted areas like mental health that all of those people will benefit from. We’ve got a third Budget to come as well.
So is that going to be the blockbuster for these people?
No, I see them all as part of an attempt to start turning around a decade of neglect in a lot of important areas in New Zealand. Two-thirds of the way through, I think we’re making good progress.

A pretty good budget

I despair about the circus leading up to and surrounding yesterday’s budget. Media even investigated the person on the cover photo of the printed budget in a bizarre sideshow. And there were a number of ‘what’s in it for you’ angles, despite lolly scramble budgets largely being very historic,

But for what really mattered, I think that yesterday’s budget was pretty good, delivered by someone who increasingly looks like a pretty good Minister of Finance, Grant Robertson.

A significant boost to mental health related initiatives is long overdue, and very good to see,

Indexing benefits to wages is also a long overdue fix to the erosion of benefit value over the years.

There’s a bunch of other stuff that can be praised or quibbled about, but generally it seems ok to me.

There is always a limit to how much a Government can spend of our money, and there’s a limit to tolerance of how much we are taxed. Robertson and the Government seems to me to have found a fairly good balance. They will never please all of the people all of the time, but I don’t think there’s much to be worried about.

National – “Robertson concedes defeat on budget rules”

National’s finance spokesperson Amy Adams has responded to Minister of Finance Grant Robertson’s announcement yesterday that the Government core debt target would change to a range (see Grant Robertson: shift from net debt 20% target to 15-25% range).


Robertson concedes defeat on budget rules

Finance Minister Grant Robertson has today thrown in the towel by scrapping his self-imposed debt target, National’s Finance Spokesperson Amy Adams says.

“Grant Robertson has been backed into a corner by allowing the economy to slow, over promising and making poor spending choices. Now, instead of a fixed target Grant Robertson has lifted the debt limit by 5 per cent. That loosens the purse strings by tens of billions of dollars.

“This is a blunt admission the Government can’t manage the books properly, it is not wriggle-room. This makes the fiscal hole look like a puddle.

“You can almost guarantee that means debt at the upper end of the range of 25 per cent. This is an admission of defeat from a Finance Minister who has repeatedly used these rules to give himself the appearance of being fiscally responsible.

“This decision will mean billions of dollars more debt because the Government can’t manage the books properly and wants to spend up on big wasteful promises in election year.

“This will pay for things like Shane Jones’ slush fund, fees-free tertiary and KiwiBuild – in other words, it’s wasteful spending.

“Debt isn’t free. It will have to be paid for by higher taxes in the future.

“The debt target is the latest broken promise by the Government as the ‘year of delivery’ continues to be an embarrassing string of failures.

“It took the last Labour Government two terms to lose its fiscal discipline. This Government has given up in 18 months. This confirms you simply can’t trust Labour with the economy.”

Grant Robertson: shift from net debt 20% target to 15-25% range

One of the biggest talking points coming out of Minister of Finance Grant Robertson’s pre-budget speech to Craigs Investors Conference yesterday was a shift from a net debt target of 20%, to a much more flexible range of 15-25% dependent on economic conditions.

The 20% target was a feature of the Labour-Green fiscal responsibility agreement prior to the 2017 election.

Robertson 24 March 2017: Labour and Greens commit to rules for responsible financial management

The Labour Party and the Green Party have agreed to Budget Responsibility Rules, which will provide the foundation for sound fiscal management after the election.

“New Zealanders rightly demand of their government that they carefully and effectively manage public finances. We understand that and are committed to delivering this,” says Labour Finance Spokesperson Grant Robertson.

“These rules demonstrate how Labour and the Greens in Government will manage the economy prudently, effectively and sustainably.”

Under the Budget Responsibility Rules the Government will:
• Deliver a sustainable operating surplus across an economic cycle
• Reduce the level of Net Core Crown Debt to 20 per cent of GDP within five years of taking office
• Prioritise investments to address the long-term financial and sustainability challenges facing New Zealand
• Maintain its expenditure to within the recent historical range of spending to GDP ratio
• Ensure a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy.

The Government will establish an independent body to make sure the rules are being adhered to.

Since the Labour-Green-NZ First Government took over in late 2017 the target (and fiscal prudence) has been strongly criticised by people on the left who have been demanding much more spending for ‘urgent needs’.

Relevant section of yesterdays speech under Budget 2019 Economic Priorities – Fiscal sustainability:


We are reducing the level of net core Crown debt to 20 percent of GDP within five years of taking office. New Zealand has low levels of Government debt by international standards, but we remain vulnerable to shocks that are beyond our control, such as earthquakes and other natural disasters. We have made our commitment to keeping debt under control to ensure that future generations of New Zealanders are in a position to be able to respond effectively to any such shock.

This Government will prioritise investments to address the long-term financial and sustainability challenges facing New Zealand. This is apparent in the intergenerational wellbeing priorities we have identified in this year’s budget and restarting contributions to the NZ superfund and our focus on issues such as climate change.

We will maintain Government expenditure within the recent historical range of spending to GDP, which has averaged around 30 percent over the past 20 years. We are also focussed on the quality of spending, with Ministers running prioritisation exercises across their portfolios to identify spending that doesn’t fit with the Coalition Government’s priorities.

I am pleased to announce today that on the 30th of May the Budget will show that we are meeting these rules again, as we did in last year’s budget.

I know there has been some criticism of this approach – particularly around the debt target. For me it is a question of balance. We have made, and will continue to make, significant investments in our future, but we also know that the volatility of the world, be it economically or through natural disasters, biosecurity incursions or unexpected events, is never far away.

The Public Finance Act obliges Governments to outline their long-term fiscal strategies at Budget time. One of the key elements of this is the Government’s approach to debt.

People in this room will all have different views on what it could or should be. That in part depends on the levels of investment you believe the Government should be making and in what areas.

We also have to take into account capacity constraints at any point in time – like in our construction sector. With this in mind, I am comfortable with the 20% point that we have been targeting. But circumstances can obviously change.

Beyond the Budget Responsibility Rules, our fiscal intentions in this budget will signal a shift to a net debt percentage range, rather than a single figure. At this point we are looking at a range of 15-25% of GDP, based on advice from the Treasury. This range is consistent with the Public Finance Act’s requirement for fiscal prudence, but takes into account the need for the Government to be flexible so that it can respond to economic conditions.

Essentially, our current 20% target falls in the middle of the new range that will exist from 2021/22 onwards.

A range gives governments more capacity to take well-considered actions appropriate to the nation’s circumstances – circumstances that change over time. It establishes boundaries within which debt is kept to sensible and sustainable levels and where fiscal choices are driven by impact and value.

For example, a government may choose to move higher up the debt range to combat the impact of an economic recession, or where there are high value investments that will drive future economic dividends. At other times it may be prudent to reduce debt levels to the lower end of the range to provide headroom for future policy responses.