UPDATED: 10:34am, September 10
New Zealand’s Delta outbreak has seen Parliament empower the Government to spend several billions of dollars over and above what was allocated in this year’s budget.
The Government was given this authority via an imprest supply bill, passed on Wednesday night.
It means it can spend $24 billion on operational expenses and $15 billion on capital expenses, as well as $2 billion on capital injections by June 30, 2022.
A large portion of this $41 billion is above what was accounted for in the budget. Some is money already accounted for, but reprioritised.
“This is an envelope of funding. It is not a target,” Finance Minister Grant Robertson said, stressing last year only 36% of the same type of provision it was given was used.
“It ensures that if unforeseen circumstances occur, the government has the authority to spend,” he said.
Opposition wants govt to stop rushing through expenditure under the guise of Covid-19
National and ACT voted against the bill.
National Finance Spokesperson Michael Woodhouse argued (see video below) the Government had spent some of the $62 billion set aside for Covid-19 in 2020 on projects with “tenuous links or no links at all to Covid-19”.
Around $8.7 billion of the $62 billion is available. Around $4.7 billion of the fund is yet to be allocated. Another $4 billion can be pulled from underspends from other projects.
Woodhouse pointed to money spent on the Three Waters reform, strengthening the Family Court, ensuring there are cameras on fishing boats and funding to commercialise NZ Music among other initiatives.
“While the projects may or may not have merit, they should have been subject to the normal budget process,” Woodhouse said.
“Covid-19 has been used by the Finance Minister as cover for circumventing established practice around new spending. These practices prioritise quality projects and weed out lower quality spending.”
Robertson said every government since 1989 had used the imprest supply mechanism, albeit to spend much smaller amounts on unforeseen expenditure than in this Covid-19 environment.
He noted members of parliament have the opportunity, through the financial review process, to analyse initiatives any of the $41 billion will be spent on.
Too early to say if more borrowing will be required
The issue of where the Government gets the funding from is a separate one, not dealt with by the imprest supply bill.
Treasury’s Debt Management Office is responsible for deciding how much government debt to issue. It makes this call based on fiscal forecasts - how much revenue the Crown is expected to receive via tax, etc versus how much it’s expected to spend.
Just because the Government gives itself the ability to spend up to $41 billion, doesn’t necessarily mean it will. It also doesn’t necessarily mean all this expenditure will be funded by new debt.
Some of the funding has already been accounted for in the system. For example, the unallocated $4.7 billion part of the initial Covid-19 fund makes up some of the $41 billion.
ANZ senior economist Miles Workman said it was too early to guess whether the Debt Management Office would need to issue more debt than planned.
He noted the economy has performed better than expected since Treasury released its last forecast bond issuance programme in May. There is more tax revenue available than initially thought.
The Debt Management Office is next due to update its forecast bond issuance programme when Treasury releases its Half Year Economic and Fiscal Update towards the end of the year.
The $30 billion of New Zealand Government Bonds the Debt Management Office is due to issue in the year to June 2022, is already more than was expected by analysts in May.
Financial markets watch this programme closely, as well as specific funding allocations made by the Government.
More govt spending could help RBNZ hike interest rates
Workman noted there was a risk that injecting more money into the currently overheated economy could simply inflate prices rather than increase economic growth - particularly as the economy is constrained on the supply side.
However more government spending does give the RBNZ the opportunity to start hiking interest rates, better placing it to respond to downturns again in the future.
Furthermore, Workman noted government spending (wage subsidies, welfare payments, etc) can be better targeted to those who need it, than changing the cost and supply of money via monetary policy.
The RBNZ is next due to review its monetary policy settings on October 6.
NOTE: This story has been corrected. Interest.co.nz was initially told by Robertson's office that the $41 billion would be expenditure over and above what was budgeted for in the annual budget. However, his office later confirmed this wasn't the case, and some of the $41 billion is already accounted for in the system.
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National Finance Spokesperson Michael Woodhouse argued (see video below) the Government had spent some of the $62 billion set aside for Covid-19 in 2020 on projects with “tenuous links or no links at all to Covid-19”.
In their election campaign, National was going to raid the same fund for tax cuts.
Just saddle future generations with the debt eh.
I wonder how far 41 billion dollars could go towards fixing our health system and housing problems.
Instead we are pissing it away on lockdowns because Labour didnt get vaccines quickly enough and Jacinda needs to ego trip on elimination.
Just saddle future generations with the debt eh.
In the specific context that is being discussed, the options are:
- Labour: borrow money and spend as part of COVID response
- National: borrow money and give it as a tax cut
Both of these are "saddling future generations with debt".
Instead we are pissing it away on lockdowns because Labour didnt get vaccines quickly enough
The reality is we could not get the globally in-demand vaccines any sooner than we did. Chris Hipkins gave a detailed answer on this last week in Parliament. National keep claiming we could have them earlier (and you are now repeating their lines) but have not provided any evidence that that is true.
and Jacinda needs to ego trip on elimination.
NZ's approach has saved hundreds, likely thousands of lives, including lives of people who have other medical conditions and are still able to use the health system because it hasn't been overwhelmed by COVID patients. That's not to mention the thousands to tens of thousands that have been saved from long COVID. The economy is also doing better than other countries, and far better than initial forecasts predicted.
If that's what you call an "ego trip" then I'm glad we have an egotistical prime minister.
We have nothing more than Hipkins’s word for that. Hipkins often has an economic view of the truth. When questioned at the beginning of this year why vaccines were not arriving in terms of the front of the queue he could have responded simply then as they were not available to NZ to order as such, instead he said we didn’t need them because we had no covid cases. Asked why border workers were not given the ability to saliva test he said they don’t want them. Of course lying in parliament is something else again though. Past perpetrators such as Colin Moyle, Michael Laws found that out the hard way. It would be helpful to settle this if Pfizer were allowed to tell their side of the story wouldn’t it.
An National have no evidence to show that Hipkins is wrong or lying.
We know Pfizer are charging different amounts to different countries. They're charging less to the African Union for the same vaccines that they're selling to western countries.
Clearly money is not the only factor Pfizer are using in determining who gets the vaccines. So the idea that we could simply pay more to get vaccines sooner is wrong.
Man you are getting over excited, or what. You are hardly without analytical ability but for heavens sake get a grip. Who is talking about paying more. No National has no proof, neither does anybody else for that matter, and that is quite obviously because all negotiations that have taken place are under wraps for reasons of commercial sensitivity which is both understandable and justifiable. So yes Hipkins can quite easily say what he likes because who exactly can access any detail that would be contradictory? What’s up with you. You go to great lengths on here to declare political neutrality in reality your comment is anything but that. Why can’t you be honest enough to just simply front up for what you are.
Who is talking about paying more.
National (Chris Bishop, and others), repeatedly. People in the comment section of interest.co.nz, repeatedly.
No National has no proof, neither does anybody else for that matter,
Has National put in OIA requests to try and find out more information?
You go to great lengths on here to declare political neutrality
No I don't.
Oh thought you were somehow drawing that from the context of my initial post. Whatever. Either way Hipkins can keep on saying what he likes knowing exactly where he cannot be fact checked. OIA would obviously be pointless. As explained there is good logical reason to keep prices paid undisclosed and the PM is right in this regard for this latest order out of Spain. Appreciate your declaration at long last of non neutrality. At least it is now abundantly clear to all concerned, where you are coming from including now, me.
talking about a plan, and actually implementing a plan are two different things. What we have learnt from labor, is there is plenty of talk not a lot of action. Talking about the team of 5 million and then sitting back and watching thousands of small business go up in smoke by not supporting them properly is just one example.
Exactly .. spend any money on any silly thing anywhere and call it "Covid recovery" - what a lovely racket.
Obviously escaped your notice that the last thing that needs "help" right now is the construction industry - which is already overstretched ; just a small inconvenient detail of course.
Tax cuts are not the bogeyman of the night. The much maligned President Harding unorthodoxly introduced sweeping tax cuts and prevented a financial collapse. The tax relief quickly spread back through the financial system, spending and investment, and stimulated it with much the same impact of QE.
I’d say many interest.co.nz readers are probably centre-left and no enthusiasts for National, at least. The fact that you’d think many are right-wing nut jobs because they can think critically about the current Government says more about you, than them, which is Brock’s point. The Ardern Government could pass a law tomorrow to kill all blue eyed babies and you’d be telling us that it was justified and in everyone’s best interests. You’re either naive, as I’ve said before, or you’re paid per post to astroturf.
The Ardern Government could pass a law tomorrow to kill all blue eyed babies and you’d be telling us that it was justified and in everyone’s best interests.
No I wouldn't. I criticise the government when I think they deserve criticism. Most of the criticism people are throwing at the government is done so purposefully disregarding that we've had one of the best COVID responses in the entire world, and have saved thousands of lives because of it.
or you’re paid per post to astroturf.
And as I've said before, probably 999 times out of 1000 whenever this claim is levelled at someone, it won't be true.
Just as it is not true when people level it at me. I do wish I would get paid for this though.
Get a grip.
I am well left of centre. I voted for Jacinda first time, but not last election.
Overall, I think Labour have been very poor under her.
They have done very little that is transformative, and inequality is worsening under their watch.
I think National are awful too. But at least they don't really pretend to care about social issues.
I have always been a labour voter but I agree with what you’ve said they have been appalling.
Sick of their divisive race based agenda on everything, their mismanagement of the housing crisis, wastage of taxation revenue, the national security terrorism failure I could go on and on.
I’ve gone the other way now and I’d vote Act and David Seymour if the election was today in a heartbeat. He’s by far and away the best politician in the country right now.
I'm with you on this HouseMouse. I voted for Jacinda first time, but not the last. I think inequality has grown a lot worse under this Government. They appear to react only when they are hauled up in the media (which doesn't happen a lot). I can't even stand watching TV1 or TV3 these days as it appears that Kiwis have turned into whingers. Whoever whingers loudest gets the Government's attention.
Completely correct. I would say that I am right-wing.
I had an argument with a family member when she was first elected.
At the time she was promising (and still is) reducing poverty, making housing affordable. All of that.
My opinion was that I (and people that don't really need to care who the government is), would do very well, despite what she and the Labour party were saying.
Her own core consistency would suffer and suffer badly under her and would end up poorer as a result. so, it seems I have turned out to be correct.
Middle of the road National supporters are doing very well out of Jacinda, traditional labour supports, not so much. As soon as she stops providing additional wealth for National supporters, she's gone. Her own supporters are going to wear the result of her false promises for a generation.
I would also agree that David Seymour is the best around by a wide margin right now, across all parties.
I reject the premise that vaccines & vaccine passports are the only way out. We can learn from Sweden, India and Israel. Sweden took little to no precautions and they have widespread natural immunity. India used ivermectin and natural immunity to win against covid. Israel's a basket case.
I understand the vaccine lobby wants to vaccinate all recovered people though. Those "naturally recovered" will be masquerading as "vaccinated" which makes the vaccine look more effective than it really is.
Sweden took little to no precautions and they have
14,700 deaths, a rate ten times higher than their neighbours.
India used ivermectin
Ivermectin is only shown to be effective agaisnt COVID in test tubes at rates that are 100 times higher than the safe dose in humans. There is no clinical evidence that supports the use of ivermectin at safe levels in humans against COVID.
India has not "won" against COVID. No one has, not even us.
You've also just cherry-picked these examples and not looked at any of the confounding factors as to why their outcomes have been different. You've just blithely assumed ivermectin = good, pfizer vaccine = bad.
There are 31 ranomised clinical trials showing that ivermectin works to (a) prevent covid disease (b) shorten the duration of sickness, and time to viral clearance, and (c) prevent death. All the scholarly papers can be found here: https://c19ivermectin.com/
Furthermore, this paper reviews the multiple mechanisms of action showing exactly how ivermectin works against covid19.[reference 1]
[1] https://www.nature.com/articles/s41429-021-00430-5?fbclid=IwAR0j4QrWrIL…
This paper[reference 2] shows that ivermectin bioaccumulates in lung tissue which explains why the compounds works despite having a poor in vitro IC50
[2] https://doi.org/10.1002/cpt.1909
Scientifically speaking, that is an absolute shitload of evidence!
But it’s not even about ivermectin. There are other effective treatments too. The problem is politicians making dumb moves. The problem is the myopic focus on vaccines. A vaccine which isn’t even that effective, and was never intended to be given to everyone. Likewise, shutting the border was never intended to be a permanent fixture, and then suddenly it is, and we’re trying to “eliminate” the virus. Where did that hubris come from? The hubris to denigrate and belittle descending voices that include Nobel laurates in virology. There’s only one virus that mankind has ever eliminated and that’s smallpox. Meanwhile how many stage-three cancers are going undetected? What are the financial implications of the massive increase in unproductive government debt, and all the business closures? How will that affect the quality of life going forward?
From the site you linked to:
While many treatments have some level of efficacy, they do not replace vaccines and other measures to avoid infection. Only 27% of ivermectin studies show zero events in the treatment arm.
Elimination of COVID-19 is a race against viral evolution. No treatment, vaccine, or intervention is 100% available and effective for all current and future variants. All practical, effective, and safe means should be used. Those denying the efficacy of treatments share responsibility for the increased risk of COVID-19 becoming endemic; and the increased mortality, morbidity, and collateral damage.
Maybe you should take that advice and stop crusading against the vaccines.
All practical, effective, and safe means should be used. I agree 100%. How many of those save effective treatments is the government advocating? In india they give covid19 patients a pack containing ivermectin doxycycline vitamin D vitamin C and some other stuff. In America they send people home and wait for them to turn blue. Looks like we're taking the American approach?
In my opinion the vaccine use case is to stop vulnerable people from becoming hospitalised, and not as a turnkey solution to the entire covid problem. I think vaccinating healthy young people and university students who're flatting is a strategically bad idea in the context of deprived natural immunity, and original antigenic sin.
Brock it is NOT debt. It is an obligation. So your future generations will not have to pay it back.
Do some research in what it means to be the sovereign owner of the NZ$, and that $ not being pinned to a gold standard and try to get your head around that concept.
It is an obligation, a fairly weighty one for the Government. They need to ensure the spending is done wisely for several reasons, to preserve the value of the NZ$, to prevent inflation getting out of control, to develop the economic base for the future and so on. The order here has no ranking as each is as important as the other, and has consequence if ignored. If the Government is successful in growing the economy then some will need to be recovered, true but taxes do that routinely. National spending the money on tax cuts, as much as I believe Kiwis should have more money in their pockets, would not necessarily be wise currently. And the purpose and point to taxes under the current situation of being the sovereign owner of the NZ$ is another debate entirely.
"Opposition wants govt to stop rushing through expenditure under the guise of Covid-19"
Did National disguise it behind Covid-19?
"Workman noted there was a risk that injecting more money into the currently overheated economy could simply inflate prices rather than increase economic growth."
This is my big concern.
Meanwhile, Labour campaigns on not increasing taxes (does so), not having asset sales (but does nothing to renationalise said assets), and increasing services (but services actually continue to deteriorate despite increased $). Your black/white distinction between Labour and National is incredibly naive. Both major parties in NZ have performed terribly in the last decade.
What about the 2017 election? What about previous elections?
Once upon a time, Labour promised to axe National’s GST increases. Never happened.
Services have NOT increased. In fact, critical services are still being asked to do more with less. Please call, at the very least, the NZNO and the GP College for more information. You could start by asking about mental health referral wait times.
You do know how election campaigns work, right? You put out a platform of policies, and voters vote for you for those policies, or they don't.
If they reject your policy platform, rolling it out again at the next election is not likely to be succesful.
National in 2008 promised not to sell state assets. Then in 2011 they campaigned on selling state assets, which they then did. See how that works?
It's mostly easier for National to keep their promises from election to election because they mostly only promise the same thing - tax cuts.
You could start by asking about mental health referral wait times.
Billions have been put into a new mental health programme. It is taking a very long time to roll out, but that doesn't mean it's not coming.
New house builds under this government are at the highest rate per capita ever - eclipsing the previous peak in the 1970s. They're building more state houses than any government since the 1940's.
Only a Labour activist would say something like all National can pledge is tax cuts. A quick look at the policy.nz website for last election run by the left-leaning Spinoff shows that your retort is incorrect. For example, in areas such as community and inclusion, National had real policy such as funding changes for gynaecological cancers, perinatal and postnatal depression, and changes to HPV smears. Labour’s policy in that area isn’t even worth talking about and is a major reason health professionals don’t take them seriously. Your position that all National has is tax cuts is as laughable as when some idiots try to paint Jacinda as Cindy the Communist: it’s dumb, incorrect, and demonstrates that the person making that comment is no more than a partisan hack.
One more thing: spending billions more doesn’t necessarily equate to better services. This is a common mistake made by Labour supporters that if $ spend is down = bad, $ spend is up = good. Because I can promise you, from personal experience, this area isn’t going to improve. The spend isn’t the problem.
National in 2008 also promised the fibre network that our lockdown would have been totally stuffed without. You're very opposed to this kind of sweeping generalisation when it comes things that might reflect badly on Labour. Interesting how the shoe is on the other foot when it suits.
Well it was passed by parliament true enough which sounds democratic enough but as with anything similar it has been passed by the Labour Party as the elected government full stop. Often in the UK this right of passage of power is expressed as something like “passed through by the Tories.” While obviously not politically correct it does though provide some different perspective in terms of the actual reality at play on the outcome one might suggest. And that’s why we need elections every three years folks.
The $30 billion of New Zealand Government Bonds it's due to issue in the year to June 2022, is already more than was expected by analysts in May.
Surely some of this issuance is earmarked to rollover the outstanding $16.195 bln 5.50% 15/04/2023 issue prior to redemption and the consequent necessity to extinguish associated deposits.
Have to agree with the opposition here, this is beyond ridiculous. The spending isn't being used for COVID related matters and there isn't enough scrutiny.
Then again, I aren't sure why they don't just get the bank account of every home owner in the country and just transfer the $41b to them, based on the current value of their house. Then go around all the schools and hand out all the kiddies a bill for the same amount. Will be a lot faster than "spending" it.
Then again, I aren't sure why they don't just get the bank account of every home owner in the country and just transfer the $61b to them, based on the current value of their house. Then go around all the schools and hand out all the kiddies a bill for the same amount. Will be a lot faster than "spending" it.
You know what? I think I agree. But what about the non-home owners and the non-kids? Build concentration camps?
correct, they produce more goods the world wants, have more minerals the world wants, they will be able to recover a lot faster. We have dairy but that looks like they may get hamstrung by regulation..and other than that..a few IT companies and.....tourism (not)..
You might want to listen to this ABC interview with Professor Allan Saul in Melbourne. He is a Vaccinologist, mathematical epidemiologist and honorary research fellow at the Burnet Institute.
They are likely going to lose control. Hundreds of ICU nurses in Sydney have already penned an open letter warning the hospitals are on the brink of collapse already. It's not just about getting covid, you won't be able to get treated for anything.
To be fair the Australian system will have much higher expectations around the standard of care than NZ does, so I think even after this standard of care is breached there is still a buffer there where they could make it work if they had to. The question is will it go past even that. I hope for their sake it doesn't.
Meanwhile in NZ we have zero buffer for anything...
It is ironic that this $41 billion will continue to hurt Labour supporters because it continues to creates wealth for property owners & decreases wealth for those in society living from pay cheque to pay cheque.
Interest.co.nz needs to limit comments to a maximum of say 5 comments per article as some people are just dominating the replies & making the site less effective for thoughtful commentary
Not sure about you Tony but I have noticed that since a couple of very vocal posters have quit posting on interest.co.nz the number of comments have decreased significantly anyway. The total number of post for each article, in particular anything directly housing related seems to have taken a big dive of late.
Unfortunately there has been little discussion by media on what is the maximum debt level as a % of GDP should be. The media tries to tell the story about how great the government is beating its own forecasts. Unfortunately if you take the measure of housing affordability, debt levels as a % of GDP & % increase in emergency accommodation as a measure of economic success the government has performed poorly. The reason the media rarely report on these issues is because the government’s performance is poor. The attached link perhaps gives a clue on this.
The economic cost for being one of the slowest countries to vaccinate in the OECD will bite us badly when Delta invades this country over the next 12 months.
Maximum debt as a % of GDP conversations have always been tarnished by comparisons to other OECD countries, who generally are out of control in this respect.
So many moving elements relating to it that I would be very interested to read a sensible impartial commentary with recommendations on what it could / should be. Even then different historical times would call for a review of those limits, such a moving feast all round.
Last year they gave S Loads of money to people who already had S Loads of money. Why not give some directly to people who need it. Maybe they could buy a washing machine so they can do their laundry at home. Instead of going to non staffed public laundromats. Many of which are now listed as Covid19 locations of interest.
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