Green Party officially withdraws support for set point debt targets, saying they've 'limited the Government's scope for change'; Party's new policy says 'current approach to fiscal management embeds neoliberalism'

Green Party officially withdraws support for set point debt targets, saying they've 'limited the Government's scope for change'; Party's new policy says 'current approach to fiscal management embeds neoliberalism'
Green Party Co-Leader James Shaw

The Green Party is officially ditching its support for the Government’s target to reduce net Crown debt to 20% of gross domestic product (GDP) by 2022.

The party had supported Labour’s Budget Responsibility Rules (which include the debt target) going into the 2017 election.

However, after months of consultation with its members, some of whom are strongly opposed to the target, co-leader James Shaw has confirmed the party has decided to withdraw its support.

He said the “arbitrary” debt and spending targets “are not appropriate and have limited the Government's scope for change”.

“In light of what we know now about the infrastructure deficit, but also because of the changing economic conditions and opportunities, we require a new approach.”

Shaw, who's also Associate Finance Minister, in late November told interest.co.nz he disagreed with using a debt target as a starting point when considering government spending. His view was that the initial focus should be on the outcomes a government wants to achieve. He therefore doesn't want to put a number to a target.

He also pointed to the complexities around a target, saying part of the issue is capacity.   

“You could dump a whole lot more money into the economy, but all you’d get would be inflation because we couldn’t get the money out the door fast enough,” he said.

“If you are going to spend that additional money, you’ve got to have a credible pathway that releases it in a way that construction companies and so on can absorb.”

Isn’t Robertson ditching the target too?

The Green Party’s announcement comes ahead of Finance Minister Grant Robertson on Wednesday being expected to unveil a “significant” infrastructure package when he releases his Budget Policy Statement with Treasury’s Half Year Fiscal and Economic Update.

Robertson’s Budget Responsibility Rules say the Government will reduce net Crown debt to 20% of GDP within five years of taking office.

He in May announced that from 2021/22, the target will be changed to a range between 15% and 25%.

However, further to his November 30 announcement that the Government is going to bring forward infrastructure projects, Robertson said it is moving to “the range”.

Interest.co.nz’s interpretation of the matter is that having already met the 20% target, Robertson is moving to the new looser target early.

‘Unlimited material growth is impossible’

Coming back to the Green Party, its announcement regarding debt comes as it adds a “fiscal policy” component to its economic policy.

Its policy document says government spending should be “sufficient to ensure ongoing wellbeing for all and the health of our environment”.

The party says spending is “currently insufficient”.

“The current approach to fiscal management embeds neoliberalism in both legislation and in the way the national accounts are prepared and so, for example, leans towards austerity measures in response to economic crisis.

“The Green Party will promote a broader and more balanced approach to fiscal policy in line with both the overall principles of this Policy, and the recognition that unlimited material growth is impossible.

“The purpose of fiscal policy should be to ensure ongoing wellbeing for all and the health of our environment.”

The Green Party wants to reform the Public Finance Act by replacing the emphasis on controlling specific measurements with a broader view based on the role it sees fiscal policy playing.

Debt debate should consider private debt as well

It also wants the Act to be amended to reframe the approach to debt to focus on both private and public debt.

When asked in November whether he believed public perception around the Green Party's capability to be a prudent manager of the country's finances had improved, making it easier for the party to walk away from the Government's prudent debt target, Shaw said: “I know from the research we’ve done that people see us now as a trusted partner in government and that is obviously different to the perception they had of us in opposition.

"I think that’s because we’ve shown we can get the work done and we’re a pretty reliable coalition partner.”

The Green Party’s fiscal strategy:

1. Incorporates the need to transition to a circular economy which does not rely on unlimited growth

2. Ensures government expenditure is sufficient to maintain and enhance the wellbeing of our people, our planet and our economy

3. Considers the capacity of the economy, such as the availability of raw materials and skills, when making decisions on expenditure, revenue and investment

4. Maintains macroeconomic stability, including full employment and controlled inflation

5. Uses the full range of tools available to finance government expenditure, and chooses the mix between them on the basis of their effects on broader goals.

6. Recognises the multiple roles of the tax system as set out in the Taxation section of this Policy

7. Recognises fiscal, social and environmental costs of both government action and inaction

8. Strengthens the resilience of our nation to sudden shocks and systemic ecological and social crises, including natural disasters.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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63 Comments

Comment Filter

Highlight new comments in the last hr(s).

And cue the watermelon comments. Reading that, seems to be what the commentariat have been requesting, I imagine this will now be somehow wrong as it's the wrong colour of politics...

It took 24 minutes :)

It’s only words, not even that much noise. Just provides a sort of holier than thou posture, while at the same time it is fully realised, that there is no prospect that it will ever become relevant. Reminiscent, in that regard, of one Mr Norman’s opinion, that he should become Finance Minister

It's a warm-up for advocating MMT.

Which is wrong.

Guess that writes off a Green/National coalation (ever..)?

That coffin already has a thousand nails in it.

National borrowed $70billion during their last tenure, I think they'll be OK with some government spending.

Ocelot ............. we had a GFC to contend with ..............idiot !

.....and a Christchurch rebuild.

Honestly, anyone who cites the gross amount of debt National borrowed in their term without acknowledging the GFC or Chch is either being obtuse or intentionally ignorant.

..don't forget the flag.

And the South Canterbury finance bailout. That was only 1.6 billion. Amazes me how people have forgotten this, and the whining that goes on about Waitangi settlements

“We”. Now there’s a give away

10
up

Did we fix the GFC..? Well done us..(or did we kick the can down the road for our kids to sort out)

We are still in it, idiot.

Yeah, but they spent something like 6-7b on direct GFC actions and something like 25b on Chch rebuild. The rest was gobbled up by infrastructure spending and (apparently neutral) tax cuts. Look at the treasury books and that's what it says...

Spend more, open the credit card ... yet be greener?

I dont think the Greens actually know what money /debt is .... or even realise money/debt/wealth is always a call on resources ... To be truely green, you need to close your bank account

There are already too many promises baked in about the future drawdown on resources ...

So what would be the correct direction in your opinion? Building up surplus indefinitely, letting that money 'sit in the bank' while the economy grinds to a halt?
There are carbone negative, productive investments by the way... if that's your main concern.

I dont think you get it either. Money is an iou for work/energy and there is already too much money to ever be cashed for the work/energy it represents.

I'm aware of that. The question still remains: what's the direction we should be heading? Borrow more to support our economy, or build a surplus and let the economy stagnate?

That's a false choice.

Those are interesting and extremely complex Qs For "surplus" I am not sure such a Q applies anymore.

ie traditionally assuming growth for ever on a finite planet when a Govn spends it boost the economy when the Govn runs a surplus the opposite effect happens as in effect its taking money out of the economy. The Q is then should the RBNZ be left on its own to put up or drop interest rates, or can the Govn by deciding to run a deficit or a surplus assist in moderating the economy.

If on the other hand you cannot grow an economy any more can we afford to borrow more as there is no growth to support such? no. This is why I find the Greens actions and viewpoint so dis-contiguous. a) They say you cant grow for ever but dont mention [growing] population as the biggest issue we face and have a co-leader with 6 children, refuse to contemplate "suggesting" birth control as it impacts ppls choices so this does not compute. b) they seem to think we can borrow more to ensure well being but the thing is borrowing implies drawing down more resources to pay that borrowing and interest back, does not compute.

We are indeed between a rock and a hard place and no party wants to say anything what so ever let alone have some honest and hard discussions on the matter.

To be truely green, you need to close your bank account

Your argument, if we can call it one, is the equivalent of saying death penalty to all prisoners will bring re-offending to zero.

Exactly. And besides, what would be done with all the hang men, once that point had been reached.

Its not an argument its a statement of fact and Math. We are on a finite planet but we have expotential population growth and they in turn have expotential demands for energy. We cant keep doing this, sooner or later its collapse time unless we curb both significantly.

Populations are only growing in 3rd world shirt-holes that mistreat women. We have easy access to more than enough cheap energy (Uranium and Thorium, not to mention PV) to provide every human on the planet with more power than used by current era Americans at prices lower than we currently pay, forever. Only two real problems humans have: 1/ Rise of big-brother type hegemonic totalitarian autocracy (China and tendencies of western left), liberal democracy is not stable, repressive authoritarianism is. 2/ Nigh-on inevitable creation of Super-intelligent AI in next 20-50 years that has decent chance of ending life on earth as it pursues its own agenda.

... and nuclear power will provide electricity "too cheap to meter" .... yes we've heard it all before

The reality
- it doesnt ...
- it doesnt work with existing infrastructure
- electricity is only part of the energy puzzle
- file it under wish science - if it was feasible and cheap we would have it already

NZ's population is set to get to 5million by 2050, are we mis-treating women then?

You have no idea on the math ie expotential function.

"2" wars over lack of resources or CC impacts is a bigger worry frankly than AI.

Western right as well as western left. There seems to be little difference in the tendency to mass surveillance, leader-knows-best and authoritarianism. Just minor differences in services that sides are willing to provide to the populous...and who gets handed money (companies/mates vs. population).

Nice straw man
Its the link between money having any value and growth that no one appears to grasp
Money = debt = wealth = a requirement for growth
Otherwise all promises fall over
And given our finite resource base (and increasingly buggered resources), it will
Interest rates closing in on zero tell us exactly that is in progress .. we're close to free money and no takers? say what
So savings / pension funds / cash /wealth claims.... everything that assumes it will be worth more (of any trade-able resource) in the future .... becomes a fiction

Agreed, they have no idea. But then with all the conflicting "pulls" on the Govn and economy its hardly un-suprising no one knows which way to turn. Even having a co-leader with 6 children shows total lack of understanding of resource limits and that population matters, hence why I have given up on them.

Great news. Provided, the debt is used wisely....
It's a bit like housing, really

This is just a Green gimmick

Yet if National had announced it you would be saying hear hear how prudent at these times.

So its OK for a National Govn to borrow but still kick most of the mess down the road, but its not OK for a left Govn to borrow to clean up Natioanl's mess and can kicking, yeah that's fair.

So Green policy is:
- the government must borrow and spend as much as possible increasing consumption amongst state sector actors.
- reduce consumption immediately to save the planet or we are all doomed.
The only way to achieve those two antithetical goals is to:
- tax the ever-loving crud out of the non-state sector and crush it's consumption into dust.

Yes, hard to say what it means. Presumably it means:
"We realise that in order for each party to fund its pet schemes they must agree to fund the other parties' pet projects too. Free pork for all (not just Shane, we want the same). Only fair."

Cracks appearing in this hastily formed coalition due to non -existent foundations

Here's a question ............

Our august leaders take more from us as a % of GDP than the Aussie Government does over the ditch

Our Government clearly does not need all this money , they have a budget surplus , so they are not spending it .

We have something called the working poor ............people too poor to feed their families properly, to the point we give some back in a money go round called Working for Families .

Why not just take less tax from the worker and let people keep more of their hard -earned money ?

Give it time... election is next year.

So tax cuts for the poor?

But, but, but, what about the politicians and bureaucrats? What about them? They need to dip their beak too.

Roger, over some time, have observed you becoming increasingly, more cynical, especially regarding our current assembly of politicians and bureaucrats. I fear you are now close to catching up to me!

Cut the bottom tax rate in half and call it a day

Why not just take less tax from the worker and let people keep more of their hard -earned money ?

That's exactly what WFF does - it is a tax credit which (as you suggest), "let's people keep more of their hard-earned money".

The real answer isn't tax credits but higher (i.e., living) wages in addition to bringing the cost-of-living down (where such costs are within the government's ability to regulate).

It gives back to some who are deemed worthy. It is wrong when a single person working 60 hours on minimum wage gets taxed at a higher rate so that some others can get a tax credit because they chose to have several children.

I think the current government brought back the independent earner tax credit;

https://www.ird.govt.nz/topics/income-tax/tax-credits/independent-earner...

Before WFF there was the family benefit, I believe. Have you always been against targeted assistance by the state to children in need?

Middle class people who have children are massively subsidizing those who don't. 10000's of hours on unpaid work to create each skilled industrious tax-slave who will provide for the lazy childless in their dotage.

Yes, but with massive non-tradeable overhead costs as the munny has to be collected, allocated, distributed, reported back to multiple Ministers and keep a small army of Gubmint drones off the unemployment rolls.....

WFF is a handbrake on productivity. Increasing it pulls the handbrake a little bit harder or jams it into reverse.

For advanced economies, all REAL economic growth should be about productivity increases, particularly focussing on efficiencies and moving up the technology chain. NZ has been doing close to none of this for about 2 decades with the occasional shining star (Xero/FPH/Scott Tech).

Opening the door to MMT.

Muppets.

Yep, and this path has been predicted.

Green may think their future is best with a Enviromentally radicalised younger generation, probably only possible in opposition.

Problem for the Greens (and left) is that the young and ignorant grow up, learn about the world, and become conservative.

If you remove
- The bit about maintaining full employment
- The context that it's coming from the Greens

It does present as a reasonable approach.

This coalition Government is the closest thing to a herd of cats that I have ever seen .

Bang on. I am aware that due to hugely insufficient capacity the Waikato Hospital is turning away hundreds of patients in order to cope with a handful of severely injured patients from Whakaari, a decade of no investment biting us in the ass again courtesy of the safe pair of hands

MMT - YES
don't borrow - issue government debt
fix it - don't worry about it

Just in time for the election.

For god's sake don't let Greens have any input into infrastructure spend. It's too important to have ideologically blinded zealots wasting money on their hobby horses (anti-car fascism and trainsets) instead of things that actually improve NZ's productivity.

Green "infrastructure" - final backup is diesel gensets... "Electricity was cut across the Alice Springs region around 2:30pm yesterday and was not restored in some areas until 10:47pm. ...The outage was caused by a cloud which rolled in to Alice Springs about 2:00pm on Sunday, which caused a "reasonably large increase" to the system, Mr Duignan said. "That resulted in the majority of our units going into an overload condition," he said. "Those units stayed in an overload condition for a number of minutes before they tripped off on their protection systems … the battery energy storage system went to full output before it tripped off as a consequence of the outage."
https://www.abc.net.au/news/2019-10-14/michael-gunner-nt-review-alice-sp...

Greens never were good at math. Though now you can't take National seriously either. "Let’s ­assume that in every one of New Zealand’s elections between now and 2100, governments are chosen that continue to fulfill the promise of going to zero by 2050 and staying there. ...if New Zealand meets its promise of zero emissions in 2050 and stays at zero for five decades, then the greenhouse-gas reduction, according to the standard estimate from the United Nations’ climate panel, will deliver a temperature cut by 2100 of 0.004 degrees.
New Zealand is considering spending at least $5 trillion to ­deliver a physically unmeasurable impact by the end of the century."
https://nypost.com/2019/12/08/reality-check-drive-for-rapid-net-zero-emi...

... are you saying that crippling our economy by spending $ 5 trillion on CO2 neutrality doesn't give you the warm fuzzies ... c'mon , we're all feeling good here , doing our bit , stealing no childhoods ...

Admittedly ... it would feel a little bit better if our sacrifice actually did some good ... but hey , you can't have everything ...

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