Finance Minister Nicola Willis’ mini-budget was a bit of a fizzer in the end.
Even though she and Prime Minister Christopher Luxon worked to lower expectations by adding more and more repetitions of the word “mini,” it was still underwhelming.
Luxon wasn’t even in town for the announcement and there were fewer journalists and financial analysts than usual as well.
Treasury’s forecasts were finalised before the coalition Government was formed, and very little new work was able to be done in the three weeks since Ministers were sworn in.
This meant all of the fiscal and economic predictions in the document reflected the policy positions of the previous Government.
Westpac economists Kelly Eckhold and Satish Ranchhod said the update showed stronger population growth and higher financing costs causing larger deficits and more debt.
“The Government has a lot of work to do to flesh out their policy programme and then implement it in a substantive way,” they said.
A list of coalition policies announced alongside the document were not new and weren’t incorporated into the long-term forecasts.
Grant Robertson, Labour’s finance spokesperson, dubbed it the “Nothing Burger” budget.
“New Zealanders go into Christmas none the wiser as to what the economic plan of this Government is, or how those tax cuts are going to be paid for,” he told reporters.
“We were also told that we would know the details of the cuts to public services, that were going to be used to fund tax cuts, that’s not in here either.”
Governments usually release a Budget policy statement, alongside Treasury’s half-year update, which sets out the priorities and parameters for the next Budget.
Willis said the incoming Government hadn’t had enough time but would deliver a “considered, thorough” policy statement in March.
The Public Finance Act requires the statement be presented to Parliament no later than March 31 and include a fiscal strategy report.
Zoom in
Jordan Williams, executive director of the Taxpayers’ Union, said the mini-budget wasn’t really a budget and a microscope would be needed to see any new announcements.
However, he was concerned about a number of new fiscal risks which had been added to Treasury’s document but were not included in the pre-election update a few months ago.
One example was the Interislander ferry cost blow out, which was flagged in the pre-election update but without a specific dollar value.
Willis has asked Treasury to make its reporting of fiscal risks more transparent, including some quantification where possible, and to collect one single list of time-limited funding.
The Finance Minister provided a list of 21 examples of material policies for which funding would expire during this Parliamentary term.
Interest.co.nz was able to find all but two of these disclosed in the Budget 2023 document.
Willis also backed a recent Auditor-General recommendation that Treasury should give more public updates on the progress of large capital projects that have had Cabinet input.
Down in the detail
The meat of the mini-budget was a set of coalition policies that would improve the Government’s fiscal position by $7.47 billion over the forecast period.
Cancelling a set of Labour Party policies and projects delivers the first $2.6 billion.
This includes stopping work on Resource Management Act reform, Wellington’s transport plan, free childcare for two-year olds, and half-price public transport for young people.
Tax and income changes save a further $2.8 billion. This comes from removing commercial building tax depreciation and indexing most benefits to inflation.
Finally, it scraps a number of projects funded through the Emissions Trading Scheme and redirects $2 billion of money back into the general Crown coffers.
This includes ending the Decarbonising Industry Fund and returning any money left in the Climate Emergency Response Fund and the National Land Transport Fund.
Willis also announced some broad details of the public sector spending cuts, although the exact amounts are not yet known and the work hasn’t been done yet.
She said Ministers had been asked to find roughly $1.5 billion in annual cost savings from their agencies collectively, with each individual target being “informed” by headcount growth.
The $1.5 billion figure was a combination of Labour’s savings programme, $400 million in contractor spending cuts, and National’s campaign promise of roughly 6.5% budget cuts.
Economists’ view
Miles Workman, an economist at ANZ, said there wasn’t much of a signal about how the coalition’s policy agenda will net out for the economy.
The new Government would face some “very tough decisions” over the next few months to maintain the tiny surplus, $140 million, that has been forecast for the year ending June 2027.
Stephen Toplis, head of research at BNZ, said there had been some questions about whether the worsening fiscal position would prevent the tax cuts from going ahead.
“We think, more generally, that fiscal restraint will probably need to be even greater than currently postulated due to the impact of the weakening economy on the tax take.”
Toplis also noted that New Zealand’s net debt track remained “relatively well behaved” with a peak at 23.3% of GDP.
“It will probably end up higher but does not look particularly bothersome,” he said.
52 Comments
Govt locking in a recession that could well last throughout 2024. Incredible that RBNZ, the previous Govt, and this coalition of crackpottery are stuffing up our recovery from the shocks of 2020 and 2021 so spectacularly.
Our position is simple - the actions of RBNZ and Govt are compounding to send the economy down the toilet - while our small town economists nod sagely in support. Where are the voices in the media saying 'Errrm, why are we punishing ourselves? What are we trying to achieve here? Why are we doing the opposite of what is needed?'
Jfoe - you have a brain. Read this -
https://dash.harvard.edu/bitstream/handle/1/37364868/BRANDERHORST-DOCUM…
(check out Fig4, P6)
and tell us what you think 'they should do'.
What exactly are we recovering from and how does economics solve it?
Fact is we've had a one trick pony for over 20 years - residential property investment and house price growth to the moon. Add on some milk, timber, tourism and education.
We are the culprits of our own demise. We didn't learn a thing from the dotcom bubble or the GFC, and the associated financial manipulations. We didn't allow the deep recessions we should've had. Doubling down on debt leverage and financial asset growth as if it's going to lead us to some economic utopia.
We continue to elect red or blue and they're no more informed or qualified than we are. Meanwhile the bank's, the financial behemoths, the tech giants, the multinational corporations pull all the strings.
We run around chasing the almighty dollar, constantly afraid of being poor, filling the void with consumerism, technology, and mindless entertainment at our fingertips. Worshipping the rich and famous, the successful wealthy "elite" who don't give two hoots other than what they can extract out of you.
We demand that our house prices "grow", and screw the neighbours, screw the have nots, screw the children, screw the planet, all for the illusion of wealth. It would look like that illusion is being shown for what it is.
The covid shock was another lesson we fail to learn from. Instead manipulated by fear, the propaganda game, and divide and conquer all well and truly used against the people. More disharmony, division and seperation during a time that we needed to support each other. And the fallout is more of the same. When we should be spending into the local economy, we're too indebted to do so.
All because we've created a parasitic rentier and finance capitalism. In a nutshell it's a collective reflection of us. And it would appear we're demanding more of the same. Replacing incompetent govts. with a different shade of the same because we lack any vision other than individual monetary wealth.
And that's after her "the size of the sausage" comment!
https://www.nzherald.co.nz/nz/willis-on-the-size-of-the-sausage/ZYG5WZD7XPJHZKYE25NM6FSIPM/
The quote in this article from Jordan Williams from the taxpayers union seems rather incongruous as compared to an email that he sent out this afternoon.
"Connor and I have just left the Beehive ‘lock up’ where we’ve spent the morning pouring through Nicola Willis’ so-called nano-budget’ so you don’t have to!
TL:DR: Grant Robertson should be ashamed. The books are in much worse a shape than we knew before the election. But worse are the 'fiscal risks' which weren't public – and ought to have been.
On the 'mini-budget' it's a non-event. Other than consolidating immediate 'stop-work' type savings, Nicola Willis is keeping her powder dry.
Our reading is Willis (and Christopher Luxon) need the bad news to sink in with New Zealanders before she can undertake the inevitable reform next year. No doubt they'll still be figuring out what that quite looks like."
There is also the addendum at the end of the email, with the title, MEDIA RELEASE, as follows. Funny, none of this is included in the above screed. Sigh.
Not since Mike Moore have New Zealanders been lied to like this – Grant Robertson should apologise
The release of today’s Half Year Economic and Fiscal Update confirms the worst kept secret in Wellington; the fiscal challenges ahead are much worse than the public were told about prior to the election.
From the Treasury lock-up, Executive Director of the Taxpayers’ Union, Jordan Williams, said:
“Treasury has confirmed that the last government put New Zealand on a completely unsustainable fiscal path. Grant Robertson should be ashamed, as not since his mentor Mike Moore has a government been so dishonest with the public about what was really going on. He should be issuing an apology.”
“It is very clear that tough decisions – and a brave Minister of Finance – are necessary to get the books back into shape.”
“The economic backdrop is nearly as bad, with high net migration dragging us into positive growth – but only just. On a per person basis, New Zealand still faces getting poorer in the short term.”
“Now that we know that the Pre-election Economic and Fiscal Update was in fact a fantasy land, we need to ask ourselves how our fiscal reporting model and institutions have failed taxpayers.”
“After Mike Moore lied to New Zealanders about the state of the books in 1990, the Fiscal Responsibility Act was put in place to ensure there were no post-election ‘nasty surprises’ like those which we have seen today. Like back then, it is not so much the numbers, as the laundry-list of fiscal risks that are only seeing the light of day now. Items that Treasury has disclosed today were absent from the pre-election update; that is clearly not good enough.”
“This feels a lot like 1990, which led to Ruth Richardson’s ‘mother of all budgets’ the following year. Budget 2024 is going to require Nicola Willis to be made of stern stuff.”
“While responsibility for the poor state of the books rests with Grant Robertson, Treasury too must accept some responsibility for the lack of transparency.”
“Under the last Secretary, Treasury became far more politicised and less reliable. The new Secretary is an improvement, but this dropping of the ball in not being willing to deliver unwelcome news prior to the election suggests she has a long way to go to get Treasury’s former status back.”
“We have previously called on the Government to conduct a ministerial or government inquiry into Treasury’s performance and public finance transparency. Today’s documents demonstrate the reason it is needed.”
So pretty much all of the surprises had alreadybeen flagged pre-election?
"The Finance Minister provided a list of 21 examples of material policies for which funding would expire during this Parliamentary term.
Interest.co.nz was able to find all but two of these disclosed in the Budget 2023 document."
Not looking like a good three years ahead if this is the best Nicola Willis can come up with. Yes, there was a delay in finalising the coalition, but she was always going to be finance minister.
that happens every election, those are government programmes only funded to a certain date and to carry them on needs new funding or to be stopped. ie lunches in schools. the new government has the choice which this government is doing by stopping some of those programmes early.
the interesting slight of hand is calling them savings that you can use for ongoing tax cuts, they are savings but not ongoing savings so once that money is gone you will need to find new savings to fund ongoing tax cuts.
The "interesting sleight of hand" is the previous Govt calling them promises.
Labour’s Transport Investment Programme had $288 billion of commitments, of which only $85 billion had been appropriated
Labour’s fiscal cliffs (programmes that they did not include along-term funding for) total at least $7.2 billion over the next four years
The Coalition have proposed changes to Public Finance Act so that there will be greater disclosure of the quantum of fiscal risks
Grant Robertson and the Labour party plundered the borrowed COVID money for many initiatives that had nothing to do with it. They had the transparency of a brick and sadly we are all going to have to pay the piper for it now. One can;t go on a bender for 3 years then expect there to be no recovery period necessary from all the elation.
If they're unfunded how can they be fiscal cliffs when no money is assigned to them?
You're falling for a narrative that is simply a blame game because the current mob made profligate promises.
It was already shown that their numbers didn't stack up before the election and now they have to find all the excuses rather than admit their own lies.
and today national announced today 50 ml over two years for an immunisation programme, so that is not a fiscal cliff? this has to go down as one of the most hypocritical governments of all time. so many things their own ministers have claimed yet call for it to be stopped for every other kiwi, putting in changes that benefits nearly every member of cabinet some to a huge amount. at least WP won't need to worry that his have ciggies harder to get or not at full strength.
Yep saw that. Wondered how they calculate the 6 and 7 times payback on "investment" they're demanding as well.
Here's the thing I think we forget about government - ROI is not a thing when providing things "the market" can't or won't.
It's a pity that they can't apply austerity measures to their own parliamentary privileges and entitlements before demanding it of others. Being the example would be an evolutionary form of leadership.
We knew this was how they'd spin it though. As if they couldn't read the Budget and all the documents produced by departments, or use PQs to get any information they needed. They've had a long time in Opposition to come up with a costed plan of action but all they've done is go, "not that".
Ah yeah it is their fault. It’s simple double column accounting - reduce tax revenue and the deficit blows out. Just like Trump and Bush before him accelerated the fiscal hole in the US.
“Tax cuts” are National’s form of virtue-signalling to their supporters. They can’t afford them but they will press-on dumbly anyway.
I don't care if Robertson fibbed or not. But the list of bombs below underline the shameless incompetence of him and the gang.
I suggest to Dan he repeatedly publish this list and updates, instead of hair splitting over who knew what first. It's the dollars that count. No political dancing will avoid the hard work of paying for it.
It's a stinking pile of gross problems.
".......List of 21 fiscal cliffs disclosed to the Finance Minister by the Treasury:
Ka Ora, Ka Ako | Healthy School Lunches Programme
Pharmac – Combined Pharmaceutical Budget
Pharmac – COVID-19 therapeutics and vaccinations
International Climate Financing Funding
Tertiary Tuition and Training Funding Baseline Pressure
New Zealand Screen Production Rebate (International)
New Zealand Screen Production Rebate (Domestic)
Cyber Security Programmes
Kāinga Ora Operating Funding
Apprenticeship Boost
Geohazards Science Services, Data and Modelling
Kānoa Operating Funding
Oranga Tamariki Disability Support Services
Teacher Supply Initiatives
North Island Weather Events Road Response and Recovery
Transitional Housing Motels
Civil Aviation Authority Liquidity Funding
Equitable Digital Access
Temporary Accommodation Services
Historic Claims of Abuse in Care
Te Matatini – Funding to Stimulate the Sustainable Growth of Kapa Haka...."
Semantics there from Bagrie solar. 1. Anything can be pulled back. 2. But it's hard to do as the millstones have been tied around our necks. 3. Robertson had no intention of dealing with it, and lucky for him he was ejected before the whole thing fell on him. 4. I admire Nicola Willis for facing up to it. eg. The ferries decision was so hard, not one I prefer, but had to be done.
Willis isn't 'facing up' to anything.
She's an intellectual lightweight with a camera-friendly face, in my opinion.
Robertson's crowd understood - albeit not clearly - that a different way of accounting was needed. The whole planet was watching for whether Wellbeing was the way forward - because everyone is in the the same boat.
But people voted for short-term consumption, over long-term viability. And got a short-term promiser; a yesterday's dinosaur. Sponsored by the very 'industries' which need yesterday to continue.
Which it won't, and can't.
That isn't leadership - it's followership.
Robertson's crowd understood - albeit not clearly - that a different way of accounting was needed.Robertson's crowd understood - albeit not clearly - that a different way of accounting was needed.
If by different way of accounting you mean spending like a drunken sailor, hiring excessive staff at exorbitant salaries for the relative work they undertake, misappropriating emergency funds for virtue signalling ideas based on knee-jerk reactions to the media, then I suppose you may be correct in some regard. While everything is underpinned by energy, and GDP will need to be a less important statistic globally in comparing countries economic performance, it is very hard to give credence to G Robertson since all of his fiscal skeletons are dropping from the closet on a weekly basis, proving his lack of competence and consideration for the impact of his decisions.
Toll roads require a completely different alignment from SH1 than NLTP funded roads, as they need an entry and exit point and must provide a reasonably significant trip to justify the overall project costs.
In accessing northland you will find our existing roads keep falling down because they were placed in the most efficient places, but even those were compromised.
So sure you can find a whole new alignment to Whangarei, but at what cost if not allowed to cross SH1 at any point?
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