Labour, the Greens, New Zealand First and the media all scoffed at Stephen Joyce during last year’s election campaign when he said that Labour had a shortfall in their budget forecasts of $11.7 billion, saying that they had neglected to roll forward their operating allowances. Respected business writers such as Cameron Bagrie and Bernard Hickey laughed off his predictions, implying that it was merely election campaign scaremongering.
Patrick Gower said there was no fiscal hole and called Joyce a liar. He actually called the Minister of Finance a liar. On social media, Joyce was mocked, saying that he never passed Economics at university, and clearly he hadn’t improved since. Grant Robertson demanded an apology, saying Joyce was acting irresponsibly. Everyone said he had got it wrong.
Well, he hadn’t. At least, not as far as The Otago Daily Times is concerned. Quote:
The Government has been accused of spending up large without saving anything for a rainy day in the face of global economic uncertainty.
“[Finance Minister] Grant Robertson’s loose and untargeted spending promises means the Government is planning to increase its borrowing by $17 billion over the next four years,” National leader Simon Bridges said.
The extra debt was made up of $11b of additional core Crown debt and a further $6b in crown entity borrowing, he said.
“At the same time economic uncertainty is increasing internationally this Government is taking the opposite approach – spending up large now and hoping that the next rainy day doesn’t happen under its watch. That’s irresponsible.
“This is a Government that is borrowing more, taxing more and spending more. Unfortunately it has no plans for how we as a country can earn more and in the meantime it’s reducing New Zealand’s ability to cope with international and domestic economic shocks.” End quote.
So a fictitious $11.7 billion shortfall has turned to a real $17 billion shortfall. In 9 months. Quote:
Bridges raised the Government’s fees-free policy for tertiary students, the Provincial Growth Fund and the $1b announced earlier this year for Pacific aid and the Ministry of Foreign Affairs and Trade as examples of the Government’s investment in the wrong areas. End quote.
Yes. All unnecessary expenditure. And now we have strikes from nurses, teachers, IRD and MBIE workers, all looking for significant pay settlements from the government purse. Quote:
Robertson said if National didn’t agree with the Government increasing investment in infrastructure, then Bridges needed to say which hospitals National wouldn’t fix, which classrooms it wouldn’t build and which roads it wouldn’t build. End quote.
Here we go. Nine years of neglect. National wouldn’t fix Middlemore, because it doesn’t need it. National wouldn’t pay out middle-class welfare to tertiary students and pensioners. As for roads… spare me. Labour has either abandoned planned road upgrades or turned them into toll roads. National will not build the light rail to Auckland airport, because it is madness. National will scrap Kiwibuild because it is, once again, socialism for the rich. National may spend less on upgrading Ronair, or at least spread it over a longer period. Quote:
“The Government’s books are in good shape, as evidenced by last week’s release of the monthly accounts. We are running surpluses so that we have money aside for a rainy day, and we are cutting net debt to 20 per cent of GDP within five years of taking office,” Robertson said.
The Budget Responsibility Rules mean that government expenses and revenue as a proportion of the economy remain stable, and both are below 30 per cent of GDP. End quote.
Tax revenues are set to fall as business confidence reduces, and Kiwis start leaving for Australia again. Industries like oil and gas used to pay large dividends to central government, but that will be falling away soon. Fewer businesses are looking to hire, as the proposed employment law changes are looming. A recession is probably on the horizon. The state of the government books could worsen very quickly, and that fiscal hole could turn into an abyss. Simon Bridges is right. If anyone of these things happens, the fiscal position could turn very quickly. If more than one happens, the surplus will disappear like a snowball in hell. Very rapidly, in other words.
Stephen Joyce was right all along. There is an even bigger fiscal hole than we thought. Maybe he isn’t quite so bad at economics as his university marks might suggest.