Today’s half yearly accounts from Treasury have confirmed that Government debt will be going up instead of dropping over the next five years after just 49 days of the new Coalition Government, National Party Finance Spokesman Steven Joyce says.
“The previous Government left the books in very good order. Treasury’s Pre-Election Fiscal Update had net Crown debt reducing to $56 billion by 2022 from $59 billion at the start of this financial year,” Mr Joyce says.
“After just seven weeks with Grant Robertson as Finance Minister, this has turned around to an expectation of net debt growing to $69 billion by 2020 despite significant growth in tax revenues.
“And this is just the beginning. The Coalition has set up very tight operating allowances for their future spending and have left very little room for dealing with the ongoing spending pressures that any Government faces.
“Most of their big spending promises are yet to be included in these accounts.
“Their additional health and education spending, the provincial growth fund and increased police numbers and salaries must all come out of their tight operating allowance.
“The other notable change in the Government accounts is Treasury’s expectation for growth to soften over the short to medium term. This is underlined by recent business confidence surveys which show small and medium sized Kiwi businesses are concerned about the economic direction of this Government and how it will affect their competitiveness.
“The Government needs to focus on restoring business confidence quickly or the growth forecasts in these accounts could also turn out to be too optimistic.
“Now is not the time to be increasing Government debt. With New Zealand’s high level of private debt, the Government should be looking to reduce its own debt at this stage of the economic cycle so that we are ready as a country for the next rainy day.”
Labour is set to rush through legislation at the end of this week to remove $1060 from the pay-packets of average Kiwis next year in the vain hope that no one will notice, National Party Finance Spokesman Steven Joyce says.
“This new law will mean people on the average wage pay $1060 more in income tax from 1 April next year than is currently the case,” Mr Joyce says.
“It is deeply ironic that the first significant act of a Government with the stated aspiration of lifting workers’ wages is to reduce what workers will earn next year.
“With Parliament marking time for the last fortnight it is quite obvious that Labour has been delaying the debate as long as possible and hoping that the public misses the changes completely in the pre-Christmas rush.
“It is also obvious from Grant Robertson’s discomfort in Question Time last week that even Labour are embarrassed by the changes.
“Now they are saying they won’t start debating the new law until this Thursday, at which point they will ram it through cynically under urgency.”
Mr Joyce says this is an extraordinary approach for a contentious change that is being driven by a party that attracted less than 37 per cent support in the recent election.
“We need to remember that both New Zealand First and the Greens voted in support of the tax package seven months ago that Labour now want to unwind. They also didn’t campaign on removing it.
“New Zealand First in particular will have a lot of explaining to do to their voter base when they vote to remove $676 a year from Superannuitants and Veterans from 1 April.
“National will be opposing the changes vigorously. We need a proper serious debate on these changes and we’ll be debating it for as long as it takes.
“This isn’t theoretical student politics. Labour’s tax plans will have a real and significant negative effect on the lives of over a million New Zealanders.”
With Business Confidence this month at its lowest level since the Global Financial Crisis, it is now time for Grant Robertson to front up to New Zealanders with some idea of his real economic plan and the actual costs of the new Coalition Government, National Party Finance Spokesperson Steven Joyce says.
“Six weeks on from the announcement of the new Government, the Finance Minister is making his first major speech,” Mr Joyce says. “It is important tomorrow for him to provide some meaningful details on what the Coalition will do and how they will pay for it.
“The public and the business sector need to know the overall costs of Labour’s major policies and the costs of the coalition agreements with New Zealand First and the Greens. And they need to know what debt levels Mr Robertson will tolerate as he implements those policies.”
Mr Joyce says there has been a lack of detail on many aspects of the finance portfolio since the election.
“We’ve had no costings released for anything except the Paid Parental Leave changes. The Reserve Bank has confirmed it is in the dark on most of the coalition’s policies and is playing a ‘wait and see’ game.
“Even the Treasury has been told very little. Mr Robertson revealed in Parliament yesterday that he hadn’t even asked Treasury to cost the coalition document before it was signed. This means major policies like tertiary education, regional development and police remain un-costed.
“We also need Mr Robertson’s understanding as to how the New Zealand economy is travelling and whether he expects it to grow faster or slower than predicted in the Pre-Election Fiscal Update.”
Mr Joyce says that the announcement of the actual date of the Half Yearly Update and Budget Policy Statement would also be revealing.
“With the appointment of a new Finance Minister it would make sense to release the update at the end of next week as the previous Government did last year.
“At the very latest it should be the following week. New Zealanders need the confidence of knowing what the new government is doing.
“We’ve all now heard Mr Robertson talk about the purpose of the economy, the need for partnership and being an active government. Now’s the time to front up with some facts.”
The Government’s Tax Working Group announcement looks like an eighteen month long rubber stamp for a Capital Gains Tax, National Party Finance Spokesperson Steven Joyce says.
“Its Terms of Reference is written so that it will propose one significant thing at the end of it, a Capital Gains Tax,” Mr Joyce says.
“Yet Mr Robertson’s assertion on the current taxation of capital gains in the property market remains incorrect. People who buy and sell houses for a profit have those profits treated as income for tax purposes under the law today.
“So people can only assume once again that his unspoken desire is to introduce a Capital Gains Tax on farms and small businesses.”
Mr Joyce says there is also no pretence at the independence of the group with the appointment of former Labour Finance Minister Sir Michael Cullen as Chair.
“Sir Michael is many things but a politically independent voice on taxation policy he is not,” Mr Joyce says.
“Let’s face it - he was Labour’s last Finance Minister and one of the key coalition negotiators for the Labour Party.
“Nothing will come out of this group that Grant Robertson doesn’t want. And all he wants is a recommendation for a Capital Gains Tax.
“Mr Robertson would be better to dispense with the expense to taxpayers and write out his tax policy for the next election when the time comes in the normal manner.”
Finance Minister Grant Robertson needs to front up on the costings for his Government’s expensive policy pledges, National Party Finance Spokesperson Steven Joyce says.
“Yesterday we learnt that Mr Robertson did have coalition costings prepared by the Treasury before the coalition was announced on 19 October,” Mr Joyce says.
“This is despite him refusing to release the costings on 28 October on TV3’s The Nation because he hadn’t had the opportunity to ‘work with the public service’.
“It is clear now that excuse was a blatant fabrication.
“Then today we have the very unusual situation where the policy on lifting student loans and allowances by $50 a week is announced by Minister Hipkins, with no substantive costings whatsoever.
“All the public has to go on are the suggested costings from the infamous BERL pre-election fiscal plan that Mr Robertson refuses to stand by.
“Where is the information on the cost of student allowances? Where is the expected extra write-off on student loans caused by this change?
“We know that Treasury and the Ministry of Education would have provided costings for this policy for it to go through Cabinet. Mr Robertson needs to release those figures.
“This is serious stuff. The Reserve Bank’s Monetary Policy Statement released less than two weeks ago had multitude caveats in it about domestic policy uncertainty because they have no idea what the new government is planning.
“This isn’t Labour’s money, it’s the public’s money. And the public is entitled to know what the new Government is spending in its name.
“Mr Robertson needs to step up and release his coalition costings, and also insist Ministers release policy costings when new policies are announced. Or are they just afraid to spoil their ‘good news’ stories with some fiscal reality.”
The new Coalition Government needs to rapidly put a ceiling on the debt levels it’s prepared to tolerate as it opens wide the taxpayers chequebook, National Party Finance Spokesperson Steven Joyce says.
“The admissions in Parliament today from Grant Robertson that he may allow debt to grow by more than $11 billion compared to the figures in the Government’s Pre-Election Fiscal Update will be concerning to all Kiwis,” Mr Joyce says.
“When I invited him to re-commit to his pre-election promise of limiting debt to no more than $67.6 billion, he refused.
“So what is Mr Robertson’s upper limit? Is it $70 billion or $75 billion? The major bank economists certainly believe it will be higher than he thinks.
“Remember net government debt was on track to reduce to $56 billion only two months ago.
“Mr Robertson’s admission follows hard on the heels of three bank reports that say the Government’s spending plans are unrealistic and ‘too tight to be credible’.
“The ANZ even says there will be no way the Government is able to meet its own Budget Responsibility Rule on debt.
“Mr Robertson needs to haul himself into line along with the rest of the Cabinet so that the increased debt predictions of the major trading banks don’t come to pass.
“New Zealanders have all worked hard to get the Government books back into surplus and start reducing the debt built up as a result of the Global Financial Crisis and the Canterbury earthquakes.
“The public will be surprised at how quickly Mr Robertson is backing away from his own numbers when he’s only been in the job three weeks.”
The new Government needs to be much clearer on its spending plans so that public institutions like Treasury and the Reserve Bank have sufficient information to perform their roles effectively, National Party Finance Spokesperson Steven Joyce says.
“This morning’s Monetary Policy Statement from the Reserve Bank makes numerous mentions of domestic policy uncertainty including ‘uncertainty around tax policy’, uncertainty around the ‘future impact of these policy changes’ and ‘heightened uncertainty regarding the domestic outlook,” Mr Joyce says.
“While the Bank is taking a steady as she goes approach at this point, it is clear that their economic forecasting is affected by a lack of clarity from the new Government as to their fiscal and economic plans.
“This is not a surprise as we are all still yet to see the figures underpinning the coalition agreement between Labour and New Zealand First, which was signed over two weeks ago, and we are all still yet to see the Government’s mythical final 100 Day Plan.
“Yesterday’s Speech from the Throne contained 51 new spending commitments, which will put significant pressure on the Government’s spending track and net debt.
“The first Bill In Parliament this week seeks to legislate for $325 million of extra spending, without any reference to how this fits in to the government’s wider spending plan.
“The public will rightly be concerned that the large number of spending promises they have heard about could sacrifice New Zealand’s hard work to get back into surplus and start paying down debt.
“The irony is that in recent years all the economic risks have been offshore. Now just as the world economic outlook is strengthening, all the risk and uncertainty is being generated domestically by the economic opaqueness of the new Government.
“It is time for the Government to be much more transparent and start releasing more details of their fiscal plans.”
The Labour Party should be careful with its review of the Reserve Bank so there remains complete clarity over the Bank’s primary role, National Party Finance Spokesperson Steven Joyce says.
“The Reserve Bank has done a good job managing monetary policy for New Zealand in recent years, and has played its part in New Zealand’s strong economic performance,” Mr Joyce says.
“With the help of sensible government policies, the Bank hasn’t had to resort to unorthodox approaches like quantitative easing or zero or negative interest rates in order to navigate the Global Financial Crisis as many other Central Banks have.
“Notably, New Zealand currently has the third-highest rate of adult employment in the whole of the developed world. The Bank already takes employment into account when setting interest rates so this makes Mr Robertson’s plan to introduce maximising employment as a second objective for the bank redundant at best, and potentially confusing.
“Monetary policy can only work successfully alongside appropriate fiscal and microeconomic policy settings and these are controlled by the government of the day. Mr Robertson needs to be aware he won’t be able to put in place policies that reduce employment and then blame the Reserve Bank if they can’t achieve full employment.
“Regardless of what he writes into the Reserve Bank Act, it will be Mr Robertson that is accountable for any decline in employment in the New Zealand.
“National is supportive of potentially formalising the current informal decision-making committee process of the Bank,” Mr Joyce says. “However we will be watchful for any plan to introduce outsiders onto the committee because that could blur the Bank’s accountability.
“We will also keep a watching brief on the second part of the review. We appreciate that part is largely a pro-forma nod to Labour’s coalition agreement with New Zealand First and the very negative views Mr Peters has of the modern and open New Zealand economy. We will be vigilant for anything which would be detrimental to the economic future of New Zealanders.”
The Government should tell Phil Goff and his council to control their spending to free up money for public transport rather than letting them raid Aucklanders’ wallets with a regional fuel tax, National Party Finance Spokesperson Steven Joyce says.
“This Council’s spending is running away on them,” Mr Joyce says. “The last thing they should be given by the Finance Minister is a regional fuel tax so they can take more money off Aucklanders.”
Mr Joyce noted the Council’s recent annual report confirms that annual revenue has increased by $1 billion over the last four years as the city has grown.
“A lot of that additional income has disappeared in business as usual,” Mr Joyce says.
“The Council has allowed its wage bill alone to go up 23 per cent in the last four years. It was $160 million higher last financial year than it was four years ago. That’s a huge increase in the context of very low inflation.
“Their total expenditure Is now $3.8 billion annually, up from $3.0 billion four years ago. No wonder they’ve run out of money for transport and other infrastructure.
“The cost saving measures Mr Goff proposed last week are very small in comparison with the problem. $370 million over ten years is just $37 million a year, considerably less than 1 per cent of the Council’s annual budget over that period.
“Grant Robertson should not be letting Mr Goff off the hook.
“The regional fuel tax will effectively only cover the cost of their wage increases,” Mr Joyce says.
“With some decent cost management the city would be able to raise the equivalent of a $150 million a year regional fuel tax, with money left over.
“Labour’s regional fuel tax will effectively just bail out the Auckland Council. The Government should do as the previous Government did and tell the Council to manage its costs properly instead.”
The Labour Government’s jury-rigged “ban” on selling houses to foreign buyers in a very strange announcement that raises many more questions than it answers, National Party Finance spokesperson Steven Joyce says.
“The first and strangest thing about Labour’s announcement is that it isn’t an actual ban. Putting houses through a sensitive land purchase criteria is definitely bureaucratic but does not constitute a ban on such sales,” Mr Joyce says.
“There are also all sorts of definitional questions. Is an apartment on the fourth floor of a building ‘sensitive land’? Is a two hectare property with two houses on it that’s being sold for development able to be sold to an international investor?
“This proposal would also be a massive compliance cost for house buyers of all types. For example, will somebody with a foreign sounding name have to prove their citizenship to the real estate agent?
“The whole announcement was very strange,” Mr Joyce says. “There has been no paperwork released and the Prime Minister indicated many of the detailed decisions remain to be made.
“This smacks very much as a ‘bright idea’ with absolutely no detail or evidence base behind it. The Prime Minister even spoke as if the Auckland property market was still rapidly appreciating whereas in actual fact it’s been flat to falling for the last year.
“Finally, if the idea gets over all the hurdles, would it actually work in terms of satisfying the concerns of our trading partners? It appears on the face of it that it would treat investors from other countries less favourably than New Zealand investors.
“This is a policy that’s designed to solve a political problem. Evidence in both Australia and here in New Zealand is that overseas buyers don’t have a significant impact on the housing market.”