Acting Prime Minister Winston Peters has suggested there may be room for the Government to loosen its fiscal responsibility rules before the next election.
This puts him on the same side as Greens co-leader James Shaw, who has made similar comments.
Speaking to media at his weekly post-cabinet press conference, Peters said it would be premature to make changes to the Budget Responsibility Rules now.
But he says there may be scope “three years down the track, when we have had three years to get on top of things.”
The rules were committed to by the Coalition Government and include reducing Core Crown debt to 20% of GDP by 2022 and keeping core Crown spending at roughly 30% of GDP.
The rules were designed to help New Zealand get through “rainy days” and to help the Government respond to an economic shock.
According to the policy, the Government can review the rules during its first term in office.
In April, Shaw said “given what we know now” – regarding the massive underspend on infrastructure – the Government might want to review the rules later in its term, ahead of another three years in Government.
Peters says any increased debt in the future should be used for “production and the growth of the economy and to build new industries.”
Recently, the Government’s rules have come under intense scrutiny.
BERL chief economist Ganesh Nana tells Interest.co.nz there is no “economic rationale” for the rules.
“I see them purely as a political animal, put in place for political purposes,” Nana says, adding that the rules were created to make Labour and the Greens look like more credible fiscal managers.
“There is no economic rationale to bringing debt down to 20% of GDP or 25% or any other particular number.
“Similarly, there is no economic rationale behind any particular number of spending as a proportion of GDP.”
He is not the only one to criticise the figures.
ANZ’s chief economist Sharon Zollner called the 20% debt target “arbitrary.” Independent economists Shamubeel Eaqub and Cameron Bagrie have labelled the rules a “fiscal straightjacket.”
Other groups, such as the Salvation Army and Auckland Action Against Poverty, have also expressed opposition to the rules.
Meanwhile, the Taxpayers’ Union has commented the Government for upholding the rules.
61 Comments
Striptease definition in Wiki: is an erotic or exotic dance in which the performer gradually undresses ....
Piece by piece, this CoLs will become butt naked by 2020 as they run to the coope. they will leave us all a huge mess ...
Looks like the partners are hungry for more money and they will find that there will be nothing left soon, so started softening and preparing the public. I guess they are bending under the demands of their voters to deliver what was promised ..
Teachers, IRD, MBIE, Nurses, Police, ... and the list goes on ... Well done Unions !!
$11.5 B hole Gents .. not small change to miss when putting together a deceiving budget !! /// included in Operating expenses huh?
Bill English told them that they will struggle when all these people ask for a payrise ... He was NOT wrong
Yet, early days, have another 2.2 years to go ...Does anyone still think that this Lot are prudent spenders of your money?
The last COL - National, Act, United Future and the Maori Party were no picnic either. Pretty sure the strikes we're seeing are legacy issues. Considering the aforementioned workers waited for a Labour government speaks volumes.
Were the union leaders in bed with National? If not, way wait till after the election to strike, why not beforehand to maximize leverage?
Given what modern monetary theory says about public/private debt the fiscal straitjacket is probably a bad idea in the current environment. Given the last governments under investment in infrastructure the fiscal straitjacket is probably a bad idea. Given where other G20 nations are going with their public debt the fiscal straitjacket is probably a bad idea. https://tradingeconomics.com/country-list/government-debt-to-gdp?contin…
So they are already getting the electorate ready for the inevitable pre-election lolly scramble.
Only 2 years to go, need to get the promises in early.
If it is prudent for the private and business sector to control debt so is it for a government.
Keeping debt below 20% will serve the country well in the long run, less tax dollars spent on servicing that debt can only be good.
But it is soooooo much nicer to play Santa now and then let the country pay for the presents long after one is no longer elected.
Flagshipp election promise that probaly got them votes and power so hard for them to back out BUT yes can and are delaying to dilute it from what was originally planned.
Also now may delay by few weeks (not much) but when passed can further delay it by giving more time to enforce it instead of it being implimented as soos as.
Wait and Watch.
Clueless economists and politicians alike. So, govt will increase debt for “the production and growth of the economy and to build new industries”. Well, given the successful history of centrally planned socialist govts that should be another epic fail. The only way they’ll keep debt to 20% is by taxing us to the eyeballs. Watch govt go from 30% of GDP to 40% of GDP in no time. Never mind, no one will be homeless and “poverty” will disappear.
I also see that $700b of Australia’s $1.7T mortgage market is interest only. When that bomb goes off get ready for much higher rates and all the govts budgeting will go out the window. No doubt Ganesh and Co will say that is highly unlikely and not envisaged...I look forward to seeing the Emperor’s clothes in due course.
The old rascal H L Mencken had this sort of lark nailed about a century ago:
The state — or, to make matters more concrete, the government — consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office. Their principal device to that end is to search out groups who pant and pine for something they can’t get, and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time it is made good by looting ‘A’ to satisfy ‘B’. In other words, government is a broker in pillage, and every election is a sort of advanced auction on stolen goods.
But good to see the Gubmint taking serious economic advice from that impeccable source: the Sallies.....
Of course they are going to borrow and spend. They are teenage boys who have found the keys to dad's ferrari.
When has Labour, in it's entire history, demonstrated any competence at investing and growing industry or creating infrastructure? They know how to tax, they know how to grow government, they know how to create more beneficiaries, because these are things that any fool off the street can do. But they have left NZ in recession every time they have come to power in the last 50 years. They are fundamentally, culturally, innately incompetent managers, particularly in matters of economics.
Yet they had the foresight to set up the Cullen Fund, one of the very few things any govt has done to prepare for the coming onslaught on costs due to old boomers being old and creaky, and wanting their superannuation. And they did pay down the national debt to almost nothing in the run up to 2008.. so no, you are just a one eyed partisan who will never admit the good things the other side does.
The GFC was preceded by buoyant times. Woopdeedoo, so the Lefties paid down some debt when the tax $ were flooding in. Check out the spending during the same time https://www.kiwiblog.co.nz/2013/05/real_fiscal_restraint.html
Deflect, deflect, deflect. My wife can hold a leftie hive silent for at least ten minutes while she outlines the support given to children in her low decile school and how important the work that Bill English sponsored was. That is changing lives for the future. Giving families like mine a $7,000 free year at tertiary education is outrageous when you have far more deserving needs out there. However it's all about the vote isn't it?
Yet I hear the exact opposite from a friend of mine that is a teacher in a South Auckland secondary school. And there are currently 60 vacancies for full-time secondary teachers in Auckland, and 141 if you expand to fulltime primary to secondary at the education gazette.
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12002356
https://www.newshub.co.nz/home/new-zealand/2018/01/more-than-17-000-stu…
Off the top of my head:
-Oversaw an increase in house building numbers from around 10000/year at end of Clark govt to around 30000/year
-Stopped increase in govt debt (as portion of GDP) from 2014 on, where many western economies are still not back into surplus since GFC.
-Grew the economy at near fastest rate in OECD - providing increased wages and tax revenues to allow for greater social investment, and making us wealthier compared to the world - luxuries are cheaper to buy as a result, even for the 'poor' in NZ (who are not poor by international standards). A rising tide lifts all ships.
-Held government employee headcount to near zero growth even as population grew 10%. Takes a lot of discipline. Huge yearly wage savings rolling forwards (that will now be frittered away by Labour)
-Reduced surgical, cancer treatment and emergency room wait times drastically.
-Reduced unemployment, got a whole lot of beneficiaries back into work. Huge long term social benefits from that.
-Started major motorway improvement/extension projects in Auckland, Wellington and Christchurch.
Reduced waiting lists by recalssifying people off waiting lists. - https://www.stuff.co.nz/national/health/90770259/thousands-left-off-sur…
That also applies to non-surgical items like occupational therapy by the way, they changed criteria to make sure they met goals by classifiying people down to the next category instead of actually providing resource.
Most of the rest of your stuff is idealogical nonsense that you think is good, holding govt headcount down.. by employing consultants isn't necessarily better than just hiring someone to do the job in the first place.
There was a lot of criticism of the Key government just 'tinkering' around the edges or 'tweeking' existing policies/legislation. And when you look for the authentically "new" legislation introduced (i.e., political/policy change) - the only big one (aside from the Cant EQ emergency legislative provisions) is the Auckland Supercity legislation and perhaps also the legislative provisions to create Charter Schools. Oddly enough, both Act Party policy initiatives.
There is also the broadband roll out and the nationwide bike trail establishment, but not significantly "new" legislative initiatives. They also continued the privatization of state held assets - again, certainly not a "new" idea/enterprise.
-Held government employee headcount to near zero growth even as population grew 10%. Takes a lot of discipline. Huge yearly wage savings rolling forwards (that will now be frittered away by Labour).
Hang on, hang on. Need to be a bit more real with this one. All that happened with MBIE, for example, was the wholesale use of contractors at twice the cost of employees.
Like Judith Collins and South Auckland burglary stats, it was a bit of a fudge rather than actual prudent investment.
Wikipedia summaries of the legislative/policy achievements of each NZ Government are excellent sources for comparisons (see heading Significant Policies);
Here's JK's Fifth National Government;
https://en.wikipedia.org/wiki/Fifth_National_Government_of_New_Zealand
versus HC's Fifth Labour Government;
https://en.wikipedia.org/wiki/Fifth_Labour_Government_of_New_Zealand
Looking thru the National 5th govt list...
Economic:
Fiddling at the edges.. only worthwhile thing in that list was UFB, Nothing exactly groundbreaking or hugely positive.
Constitional: Meh, nothing notable in that lot.
Social Policy: ERA was a good thing. the rest of it mostly fiddling at the edges.
Foreign affairs: Yawn.
Defence: Yawn, nothing of significance
National Identity: Ah, the famous flags referendum. Nothing more need be said about that.
Education: impossible to objectivily say whether the changes were a good thing or not.
Local govt: the supercity.. process started under Labour, whether its a good thing or not entirely debatable. Not really a fan personally.
Nothing there thats particularly forward looking really. A mediocre govt that benefited from the Chinese boom but didn't really do much.
..you were happy to wait 9 years for nothing, and based on your ramblings, would have been happy to wait another 3 years for zilch.
Key was hopeless...an emperor with no clothing who ran away before the drapes were pulled off. His tribal followers are too proud to admit their man was a fraud.
Wikipedia again is the place to go;
https://en.wikipedia.org/wiki/Sixth_Labour_Government_of_New_Zealand
Oh boy here we go… For the layman it means:
- We promised we were not going to borrow more
- We promised to make everything better
- We now realise we can't make everything better so we're going to break our first promise to throw more money (your tax money) to try to make things better.
Yep, and this BS will go on and on for the next two years ..borrow to build useless projects or shoulder the entire cost of few hundreds of houses for FHBs and splash on their mates early enough to hope for some votes.
GR has discovered how deep in the trough he is getting with his balanced budget. Poor and bankrupt PT is looking for crumps to make a big loaf out of it and feed to the believers in the return of the messiah in 10 - 15 years in Mangere!
Not a word about child poverty, homelessness numbers, sick children, and deteriorating health care and education system, no mention of the 1B trees, etc ... labour supporters are truely taken for a ride.
The borrowed money will be paid in pay rises , free education and some state houses to satisfy certain groups and maybe to sustain SJs spoils and booties.
Another lowbrow thread - come on people, raise the level or vamoose, eh?
Peters is wrong, in that going into debt at this stage in global proceedings is wrong. If Shaw is advocating that, he's wrong too.
But if they're advocating a crash programme to get us onto alt energy, and the perceived urgency calls for central management, there may be an argument for it.
As to those who chant the 'no government' mantra, they should remember that without it we wouldn't exist. The only reason you can reasonably expect to have property rights and reasonably expect to retain them, is through central management. We made that tacit agreement a long long time ago.
A journalist (reporters only regurgitate) should investigate what's behind this - whether they've been briefed...
Another lowbrow thread - come on people, raise the level or vamoose, eh?
Peters is wrong, in that going into debt at this stage in global proceedings is wrong. If Shaw is advocating that, he's wrong too.
But if they're advocating a crash programme to get us onto alt energy, and the perceived urgency calls for central management, there may be an argument for it.
As to those who chant the 'no government' mantra, they should remember that without it we wouldn't exist. The only reason you can reasonably expect to have property rights and reasonably expect to retain them, is through central management. We made that tacit agreement a long long time ago.
A journalist (reporters only regurgitate) should investigate what's behind this - whether they've been briefed...
Not all government borrowing is equal. It is one thing for this government to borrow for infrastructure projects - which a good argument can be made. However, to borrow to put more into Working for Families or any like program is not good borrowing.
I know this government loves reviews and working groups so perhaps they could set one up on health and welfare. What is the purpose of our spending and are we spending wisely. I find it strange that we have defence reviews almost every other year which is only $3.2b per year where as health (over $18b) the answer always is more money.
We have a growing population, and a population growing old.. so yes, healthcare spending is always going to increase just to stand still in the relative delivery of services.
We don't have and expanding coastline or sphere of influence, so the same justification for defense spending isn't there.. its about replacing obsolete equipment and how much monitoring of our EEZ do we want to do. And how much civil defence/ foreign aid work do we want our military to do?
I think you missed my point regarding the review of health. As I pointed out we spend a huge amount on health per year but we have never as far as I can remember have asked the question is their a better way to do this. One answer could be to privatise health or the complete opposite ACC is extended to sickness/illness. We have never reviewed the rationale for spending the money we do the way we do it. So it's not a question of spending more because if the system is broken then more money won't help. However, maybe we have the best possible system in the world and more money will help. Of course it would help to know what the aim of the public health system is? Primary health deliverer or safety net?
Privatising health will never get off the ground politically in NZ. The swiss system actually looks to be workable, but no way would lefties ever go for it, Nor would the boomers if their healthcare wasn't subsidised to a huge degree since they are at the age where their premiums on any sort of commercial basis will have to be huge. Old creaky people are expensive.
The point is that COL is already committed to borrow more in money terms than National was. However as they projected GDP to grow, COL borrowing plan was to be at a slower pace compared to projected GDP growth rate. Borrowing is eating from your future. So unless the debt can reasonably be expected to result in more to eat in future, there is no justification for borrowing. Government borrowing to pay supper, welfare and to a lesser extent health services is very unlikely to create any additional money in the future.
Ganesh Nana, he of the categoric assurance there was no fiscal hole in Robbo's budget, says 'there is no economic rationale to bringing debt down to 20% of GDP or 25% or any other particular number'.
Provided it is genuinely development targeted he is correct, there is none. .... other than maintaining the insulation from future economic shocks that the husbandry of the previous government had created. So why was the coalition so quick to set this target ? - simply because they would not otherwise have been in government. They knew the electorate did not trust them to manage the books. And that distrust is being justified by the leaders proposal today that borrowing be increased to effectively compensate for wasteful spending elsewhere.
Peters will be flying a kite on Robertsons instructions to test the reaction of the electorate. It'll be fun watching him at press conferences mouthing answers for Peters to give on this issue.
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