The Labour and Green Parties are pledging to reduce government debt, and believe there’s enough fuel in the economy to do so without reducing government spending.
Announcing their joint fiscal strategy, or ‘Budget Responsibility Rules’ on Friday, the parties say they would work towards cutting net Crown debt from 25% to 20% of GDP, if elected into government.
At current levels of GDP, that’s an $11 billion reduction.
While Treasury forecasts suggest the Government is on track to reaching this target in three years, by mid-2020, Labour and the Greens are giving themselves five.
Speaking to interest.co.nz in a Double Shot Interview, Green Party co-leader James Shaw, discusses how a Labour/Greens government would reach this target while keeping core Crown spending at 30% of GDP. (And here's a video interview with Labour's Grant Robertson).
1. Economy going through ‘expansionary phase’
To begin with, Shaw says the economy is buoyant enough for government debt to fall without spending being hampered.
“The economy is currently going through an expansionary phase, so there is actually a bit more cash available. These are the surpluses that Bill English has been banging on about for some time,” he says.
“The government already collects quite a lot of money every year and the economy is currently growing, so there are actually increased receipts coming into the government as a result of that.”
Asked whether he’s saying Labour and the Greens would rely on more growth, rather than less spending, to achieve their target, Shaw responds:
“One of the things the Government has said is that they really want to reduce government spending as a proportion of GDP - right down - in fact lower than it has ever been in modern history…
“We think they are doing that at the expense of core public services and that is unnecessary. Government should be the right size. It needs to be as large as it needs to be in order to be able to deliver those core service.”
2. Reprioritising spending:
- Some roading projects should be ditched in favour of rail
Labour and the Greens are committing to decreasing government debt by reprioritising spending.
Shaw is specifically big on doing so by spending less on roads and more on rail.
While he wouldn’t scrap new roading projects that have already started, he would get rid of some that are on the drawing board, “where the commitment is substantially in the future”.
Shaw argues: “90% of transport funding in this country goes on motorways, some of which have got very very poor benefit cost ratios.
“And you saw a couple of weeks ago there was an announcement that the Puhoi to Wellsford extension - the cost has blown out from $495 million to $2 billion… Even when it started, it only had a benefit cost ratio of 0.25%.”
Rather, Shaw says the North Shore rail, which the Government has committed to completing within 30 years, must be brought forward.
The Green Party has also said that if in government it would want to cover the entire $1.4 billion cost of the light rail proposed between the Auckland CBD and Mt Roskill. Labour has only committed to paying half.
Pressed on how the Green Party would reduce debt when forking out for such costly rail projects, Shaw confirms its fiscal policy takes these spending commitments into consideration.
- Super Fund contributions should resume
The other spending commitment the Labour/Greens ‘Budget Responsibility Rules’ has considered is re-starting Crown contributions to the New Zealand Super Fund.
“It [the Super Fund] was set up to deal with a pretty significant risk in the form of the baby boomer generation moving through retirement over the course of the next 20, 30 years. The extent to which that has been underfunded places quite a big risk on future generations,” Shaw says.
The Government contributed $2.24 billion to the Super Fund in the year before contributions were suspended in 2009.
“I can’t commit to a specific level [of contribution], because we’ve got to see this year’s Budget before we know precisely what the numbers are,” Shaw says.
“We know that we won’t be able to resume them at the same level at which they were discontinued.”
Asked about his views on increasing the age of eligibility for New Zealand Superannuation to raise revenue to pay for Super Fund contributions, Shaw doesn’t believe the time is right to change the status quo.
“You shouldn’t go changing the settings - whether it’s age or any of the other options on the table - unless you’ve got cross-party consensus on it…
“When you’ve got all parties signed up to it, then you can say to people: ‘Here is the plan for the next 20, 30 years, in terms of how Super’s going to work’.”
Shaw says a government needs to be able to reassure people the plan around something like Super won’t change when a new government comes into power.
Asked whether he would back National’s plan to lift the age of eligibility by six months each year from 2037, until it reaches 67 in 2040, Shaw says: “I thought it was a volatile announcement and I think it avoided the main problem, which is the Super Fund payments.”
3. Tax on capital gains and carbon
While Labour has said it wouldn’t propose income tax policy changes this year, as it can pay for all its election promises with existing tax revenue, Shaw says the Green Party will be releasing a tax policy.
“We think that there is some urgency around climate change and the imbalance in the housing market that does demand some action in that first term of government. The Labour Party have said that they want to review the entire tax system in that first term of government and I’m comfortable with that.”
Shaw says the Greens’ policy will be “broadly consistent” with the policy it put forward in the 2014 election, even though “some of the numbers have changed”.
The Green Party has advocated for a carbon tax, which would enable 97% of New Zealanders to get income tax cuts.
It’s also supported increasing the levy visitors pay to support tourism infrastructure spending and the ambition for New Zealand to be predator-free by 2050.
Finally, the Green Party supports a capital gains tax, even though Labour has walked away from this; instead opting to expand the current bright line test from two to five years.
Asked whether he believes he would be able to twist Labour’s arm on capital gains tax if in government, Shaw says: “Like any government, the ability of coalition partners to influence the shape of that government really comes down to their numbers in parliament proportional to other parties.”
42 Comments
On the subject of roads and light rail - Transport Minister Simon Bridges has just put this announcement out - opening up the plan for rail from Auckland airport into the city:
Route Protection for Mass Transit Corridor to Auckland Airport to begin
Transport Minister Simon Bridges has today welcomed a significant decision for Auckland’s future mass transit corridor between Auckland city and the airport.
“Route protection will now begin to provide a mass transit corridor between the airport and Auckland city,” Mr Bridges says.
“This is a significant step for Auckland and will secure better transport options for both Aucklanders and visitors to the city.”
The NZ Transport Agency and Auckland Transport worked together to develop a joint solution that will progress from bus services to a light rail transit solution.
The study found an advanced bus option could provide a credible solution over the next 30 years that could progress from the current bus-based system to a long term solution.
The study also demonstrated the advanced bus option has the potential to deliver on forecast demand depending on the rate of growth of the city.
“By drawing on international expertise, they have identified a range of opportunities for bus travel through a separated corridor, using innovative technology and customer-focused solutions,” Mr Bridges says.
“In the medium to long term, this will make it possible for a staged, integrated transition to light rail along the preferred ‘Airport to City’ route based on future demand and capacity.”
“This work follows the Auckland Transport Alignment Project that identified the future pressure on mass transit corridors and the need for route protection to ensure future economic growth and productivity,” Mr Bridges says.
Work on route protection will be progressed with urgency to future-proof options for both advanced bus and light rail.
Of course this works in places like Singapore( Pop almost 6 million ) and Hong Kong (Pop. 7 million) , island-state cities that do not have the geo-physical characteristics of Auckland (Population under 1,5 million ) .
Then we have a tiny little CBD by any city standards , so we can never sustain mass rail transit system
Our population is simply too small for this grandiose plan
yet our 'too small' population can afford $2billion for a motorway from walkworth to wellsford to service 10,000 trips per day? A motorway that returns less than 25cents in benefits for every dollar spent? When you take away such wasteful pork barrel projects, suddenly a whole bunch of transport spending is freed up to be used where people actually live and face daily congestion.
In comparison dominion road carries 23,000 vehicles per day and given half the people travelling on dominion road are in a bus you are probably looking at 50,000 people per day. So if we can justify $2 billion for Wellsford commuters then we can justify $10 billion for dominion road alone, let alone to the airport.
WTF is this Green obsession with rail , which is in terminal decline worldwide generally , and in New Zealand in particular .
Raillines are more expensive to construct than roads, have limited flexibility , give zero revenue to the state ( by its nature carrying passengers is not profitable) require constant funding for capital expenditure and maintenance ( it cannot be taxed like road user charges or fuel levies ) .
Its slow , archaic , and Auckland commuters would stop using rail if parking was not so expensive .
This policy is stillborn , and a vote loser
Compare what San Francisco Bay area is like compared to Hong Kong. San Francisco is a very nasty Auckland like commute, despite massive roading infrastructure, Hong Kong on the other hand, has a cheap, fast and efficient rail, and subway system. If government population projections are right, future Aucklanders will really regret the near sightedness in infrastructure planning. Most Aucklanders already do.
Why would I be joking? Why is rail passengers growing in Auckland? Yes we know you are retired and doing up the lifestyle block but times have changed, more to life than motorways and traffic lights. Look at the best cities in the world...rail is a major part of their transportation so I think your views are not shared by the majority.
Road access to Auckland seems to be mostly broken. Rail between the airport and the central areas of Auckland would be really useful for me. Wasting time stuck in traffic because everyone is leaving at 3pm on a Friday so they can get away for the weekend seems insane to me.
Rail tends to receive subsidies as it saves a lot of road maintenance. Just about every person travelling by rail is taking a car off the road. That's a lot of cars.
It's often because they've lived in cities that have already trodden Auckland's future path - upping the volume of occupants and intensifying the city. And they've experienced the difference between trains and cars in such cities. Trains have often been much more convenient and cost-effective.
Either you keep buying up more land to build ever wider and multi-layered roads, or you use public transport and intensify around its stations.
Boatman,
"rail,which is in terminal decline worldwide generally". More garbage. According to the the 6th UNIFE World rail Market Study,market volume hit a record high of 160Bn Euros in 2015 and is expected to reach 185Bn by 2021. To quote from the study;"megatrends like population growth and the global increase in urbaniasation will ensure that demand continues to grow especially in urban areas".
I suggest that you start doing some fact-checking before posting anything,as you look increasingly silly. How about going down to Pokeno VERY early one morning and join the ever growing stream of those heading North to work. Even once might make you think a bit harder about this major problem.
I am truly at a loss to understand the remark the moving people with rail is "more effieicent " than road ?
Has this fellow EVER been on a commuter train , its is the slowest, dirtiest , most uncomfortable and mind numbingly frustrating way to get around imaginable .
It stops at EVERY little stopping point , you have to walk miles ( in some cases) in the rain ( for 5 months of the year ) to get to a station .
It has nothing like the flexibility of a car / ute/ truck / waste collection vehicle / police van / fire engine / ambulance or any of the variations of motor vehicles we use every day
Trains, and other public transport, never entirely replace motor vehicles. However rail isn't in decline. Whenever I'm in Hong Kong the MTR is rapid and gets you around very effectively. Perhaps rail in Auckland could do with investment, sophisticated planning instead of being run down and of limited use.
I Know Queen street has the same demographic as Stanley Street in Hong Kong , but just in case you were not aware .............. this is NOT Hong Kong
MRT works in cities with 6 or 7 or 10 million people ............. not in small cities with tiny little CBD's like Auckland
Give National a chance, mate, they're importing people into Auckland as fast as they can!
This seems to be a constant conversational thread though.
A: "Rail doesn't work anywhere in the world!"
B: "It works in these places, look."
A: "Ah, ok...But, but...we're not those places! It can never work here"
Rinse and repeat...meanwhile we keep importing people, clogging up the roads...
It would work in Auckland, unless the motorways and inner city streets have their lanes doubled. You'll also find that there's a lot of research that shows as you increase motorway capacity then more people use the roads. That's just kicking the can down the road.
Also try comparing Brisbane and Auckland. The train system there is pretty good for getting around. In fact it's handy for getting around a lot of Queensland. Travelling from an almost rural area, to Central Station and then onto the Gold Coast (at the end of the line) was pretty economic and fast.
Perhaps you are right we should not compare this to the MTR and instead look at linking Auckland and Wellington plus the stops in between with commuter rail.
They are more efficient because they can move more people in less space. One train can move as many people as 400 cars. When cities reach a certain size there just isn't enough room for cars, especially in Auckland which has a lot of geographical constraints. If you'd rather be stuck in traffic then so be it, but a lot of us would rather be doing something else with our time.
What a load of rubbish! So we didn't have free education for our children before the Taranaki oil fields? I don't know about you, but I put a high price on drinkable stream water and a clean healthy environment for my children. This is what I want to preserve for our future. If you want an oil field, go put it in your back yard and leave me alone!
Oil and gas is a really big, interesting and important issue. May need to do a seperate interview to do it justice! It will be a tough one for a Labour Greens Government to navigate, as the Green Party is opposed to it, but Labour is big on supporting industrial workers and regional development. Andrew Little is also from Taranaki, and the place would be wrecked without oil and gas.
Precisely , Labour and the Greens are so diametrically opposed on fundamental issues , this marriage cannot last .
They barely agree on anything , so how will they ever govern ?
Like the former Labour leaders marriage , its a farce and a marriage of convenience , and the New Zealand public while showing tolerance , is not easily fooled by these antics .
just so I am clear -
They are going to cut national debt by 5%
increase public spending each year to keep the % the same ( or maybe more)
add a billion or two to the superfund
fund a few major rail projects - including the 1.4 billion light rail
give 97% of new Zealanders tax cuts ( think there are more than 3% who don't pay tax so thats everyone)
pay for it all with a visitor tax and carbon tax for 3% of the populations
.... got to love TUI
So to be clear they are going to cut the national debt by 5% 2 years later than national are predicting and cut taxes less than national are predicting and also introduce a visitor tax ( which national are not planning to ) . All sounds a lot more plausible than our current government.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.