Today’s Half Year Economic and Fiscal Update (HYEFU) confirms that despite a hot economy where everyone is competing for scarce labour and resources, Finance Minister Grant Robertson isn’t easing off his big debt-funded spend up and that will fuel inflation and hurt Kiwis, National’s Finance spokesperson Simon Bridges says.
“Improved macro fiscals like a higher tax take and lower expected net core Crown debt are all well and good, but that doesn’t wash with Kiwi families who are being burnt by price rises that far outstrip wage increases.
“Core government spending is forecast to run a whopping 68% higher since Labour took office this year. The HYEFU reforecast shows government spending remaining high even post-Covid.
“While elevated spending levels were appropriate through much of the pandemic, many economists and the likes of the Reserve Bank now confirm its an overheating economic picture where adjustments and some easing off is required. Otherwise Labour is just outbidding private players for land, building supplies, and motel rooms, and forcing prices up across the board.
“Not all spending is good investment and you can have too much of a good thing. What’s more, an awful lot of it is being funded by borrowing, which means it has to be paid back eventually.
“The real kicker though is that this spending is pushing inflation higher and that in turn is forcing the Reserve Bank to keep hiking up interest rates. More than half our inflation is from the non-tradables sector and so home grown, and at 4.9 per cent its growing faster than it has in over 30 years, much faster than in Australia (3 per cent), and much faster than wages at 2.4 per cent.
“Inflation is literally taking money out of Kiwis’ pockets and making us poorer. Whether it’s the mum at the supermarket, the tradie at the petrol station or the young person trying to buy a first home, inflation is making things much, much harder.
“With all Grant’s spending, it’s up to the Reserve Bank to come to the rescue, pushing interest rates higher than they might otherwise need to go.
“We are saying ‘rein it in a bit Minister’. Take off some of the pressure on inflation and interest rates and give Kiwis an economic fair go. Your hot economy is burning us.”