Comment: It’s interesting that Christopher Luxon is saying Opportunity is all about higher tax. Let’s check his bona fides.
In 2023, on the election trail, now Finance Minister Nicola Willis promised to turn the budget deficit from $9.5b to a surplus of $2.9b for this 26/27 year. She’s come up a bit short – it’s going to be a $14.1b deficit, according to the Treasury.
Is a $17b forecast error trivial enough for National’s management of the Government’s books to still be defensible?
Why have they patently failed in terms of fiscal management – and how do they gather the gall to suggest every other party is worse than them? Financial credibility is not the strongest suit for Christopher Luxon’s Government.
Before Covid, the Government ran a surplus of 2.1% of GDP (core spending 28%, core revenue 30.1%). Today it has a deficit of 2.2% (spending 32.6%, revenue 30.4%).
The problem is clearly spending. At the time of taking office in 2023, the handover figure from Labour was a deficit of 1% (spending 32.2%, revenue 31%).
Covid blew the lid off spending as we all remember. But the story here is why, once that spend was over, hasn’t it come down. Labour didn’t manage to get it back down (ran out of time probably), National over its three years has managed no progress either – in fact it’s up a bit.
So the nonsense of politicians screaming that it’s all the other party’s fault is just that, nonsense. Neither Establishment party has managed to make progress from the one-off Covid spending spree.
Why not? The Government’s not still paying the emergency wages and all the rest of the Covid era big spend? What’s taken its place?
Health, interest, welfare and superannuation are the main culprits. In other words, the general items of government spending.
Despite all the noise they make about their fiscal discipline, National has not delivered. This is why Nicola Willis has so much egg on her face when trying to defend the $17b forecast error of her budget deficit projection.
National’s dumbed-down election billboards claiming the high ground on tax should be balanced by advertising how bad they’ve been on controlling spending.
Ironically they’ve achieved no more on tax than previous governments have – it’s been steady between 29-31% of GDP since 2016 at least – but they certainly get the prize for not getting spending back down. Fiscal blowhards for sure.
And, by the way, Opportunity’s tax and welfare reform is fiscally neutral so the Nats are proving they still mouth off before doing their homework.
In Part 2 on Monday: Restructuring the tax and spending base
