Analysis: The day politicians have been dreading or eagerly awaiting has arrived.
On Tuesday, the Government opened its books for the pre-election economic and fiscal forecasts – critical numbers for parties putting the finishing touches on their economic plans ahead of the election.
In recent weeks, the books have been the subject of an immense amount of speculation, particularly after July figures showed the Government’s deficit was likely to swell by $2.2 billion off the back of lower-than-expected tax revenue.
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National’s tax plan was described as self-funding and revenue neutral by finance spokesperson Nicola Willis, in an effort to insulate it from whatever damage had befallen the Crown’s bank balance. Questions and retorts were exchanged in Parliament over the state of the books. Finance Minister Grant Robertson and Prime Minister Chris Hipkins preemptively announced a $4 billion savings initiative in an effort to prop them up.
And, of course, New Zealand First’s Winston Peters claimed there would be a $20 billion hole unaccounted for.
In the end, the opening of the books was relatively uneventful. No horde of shrieking demons emerged to drag Robertson to the fiery abyss for his crimes of Government expenditure. Nor did a chorus of angels descend to congratulate the finance minister on his fiscal prudence and tell off Willis for baseless fear-mongering.
The economy, the forecasts show, is on the mend. New Zealand will emerge from our brief, technical recession and – after a period of slow growth – return to the norm. Inflation will fall below 3 percent next year. Wages will grow faster than inflation and unemployment will peak below the long-term average.
The Government’s own financial state is a bit of a mess, but not significantly different than expected. The return to surplus has been pushed back a year, to 2026/27, due to the decline in revenue and growing cyclone-related expenditure. Debt will be a bit higher than anticipated, but still well below the 30 percent of GDP cap.
This is the worst possible result for political parties, because it leaves them relatively little to celebrate or catastrophise about.
Not that that stopped them.
Robertson angled his press release on the good news for the economy: “No recession, growing economy, more jobs and wages ahead of inflation”.
National and Act went the other way.
“Treasury’s pre-election economic forecasts show that six years of Labour’s economic mismanagement has taken a toll on New Zealand, with forecasts showing a sustained economic slowdown, high inflation and high interest rates,” Christopher Luxon warned.
“Now Grant Robertson’s destructive legacy has been laid bare, the need for real change in New Zealand’s direction has never been clearer,” David Seymour proclaimed.
Even the Greens had a go at plugging their wealth tax.
“While the books are better than expected, it is completely ridiculous that both of the major parties are resigned to cutting back spending and public services instead of making the tax system fairer. This will impact lower-income people most of all,” finance spokesperson Julie Anne Genter said.
You could be forgiven for thinking each party is talking about a completely different report.
The truth, as it often is, is somewhere in the middle.
Yes, the economy is recovering. Inflation is coming down, GDP is rising and wages are growing. Also yes, the Government’s books are in poor shape and future spending needs to be curtailed unless new revenue streams are introduced.
For Labour, the “light at the end of the tunnel” is a welcome relief. But the struggle is that it’s still 12 to 18 months away and households are feeling the pinch right now. Convincing them that help is on the way will take concerted effort and so far the party is struggling to make even simple messages (free dental for under 30s and GST off fruit and veges) heard.
For National, the ability to capitalise on economic and financial anxieties is still here for a while longer. But it should be careful not to rag too much on the state of the economy, lest it seem disingenuous in light of the rosier-than-expected forecasts.
At least there’s one thing everyone can agree on: Winston’s $20 billion hole is nowhere to be seen.
