Source: Radio New Zealand
Finance Minster Nicola Willis says going harder could hurt lower income families, while going softer was “reckless and irresponsible”. RNZ / Mark Papalii
Both Labour and the Taxpayers’ Union have hit back at criticism levelled at them by Finance Minister Nicola Willis, saying she must take responsibility for the state of the books.
Treasury’s Half Year Economic and Fiscal Update (HYEFU) – published on Tuesday – showed a surplus was not forecast until 2029/30, although Willis said the government would still target 2028/29.
The expected deficit for 2025/26 was projected to be $13.9 billion, $1.8b worse than forecast in May. A slower economy, lower tax take, higher debt costs were cited as reasons for the revisions.
In her accompanying Budget Policy Statement, Willis mounted a defence of her “deliberate, medium-term” strategy, and attacked her opponents on both the left and the right.
She acknowledged there were calls for her to take a harder approach – and cut spending faster – and those who wanted a softer approach.
But Willis said going harder could hurt lower income families and depress demand in the economy, while going softer was “reckless and irresponsible”.
She used Labour’s opposition to the government’s savings measures to create a hypothetical Labour Budget, with an increase to the deficit and the debt.
Using Treasury’s analysis of the savings the government had delivered over its first two Budgets, Willis’ office calculated that if government spending in 2024 and 2025 had not been offset by its savings programme, then the OBEGALx deficit would be $25b, and net core Crown debt would be 59 percent of GDP over the forecast period.
“We have the receipts, and unfortunately for Labour, having opposed every saving that we have delivered, they cannot take a position of responsible fiscal management,” Willis said.
But Labour leader Chris Hipkins questioned whether Willis had factored in the government’s tax cuts to those forecasts, an initiative Labour would not have gone ahead with.
“We certainly wouldn’t have delivered the tax cuts that they delivered at the last election, which have now created the structural deficit that Nicola Willis is dealing to.”
Labour’s finance spokesperson Barbara Edmonds said the government and Willis had made the wrong decisions.
“She’s blamed Labour. She’s blamed Fonterra. She’s blamed Ruth Richardson. She’s blamed the unions. She needs to have a good, hard look at these books and reflect on the choices that she’s made.”
The Green Party’s co-leader Chlöe Swarbrick said the government had created a “doom-loop” for itself.
“They have underfunded our public services and infrastructure, they have completely gutted the circumstances necessary for creation of jobs and a productive economy, which in turn has meant they have lowered their tax revenue,” she said.
“All of this has meant that we are circling the drain as a country, and these are active government decisions. Different decisions can be made.”
At her Tuesday media conference, Willis brandished a policy document from the Taxpayers’ Union, which said abolishing Working for Families tax credits would save $2.98b in 2025/26, or $14.95b over the forecast period.
Willis said such a policy would take money away from 330,000 families overnight, with beneficiaries and low-income working families to bear the biggest brunt.
“It would create a level of human misery that I, for one, am not prepared to tolerate.”
The Taxpayers’ Union head of policy and legislative affairs James Ross told RNZ not all of the suggestions in the document had to happen, but the longer it took the government to make choices, the harder it would be.
“The real story is that for the third time in just two years, the minister has seen the surplus slip back and back and back,” he said.
In the HYEFU, the cost of superannuation payments was projected to increase from $24.8b in 2025/26 to $30.9b in 2029/30 (with the number of New Zealanders receiving Super tipped to cross the one million line in 2027/28).
Willis, who temporarily put on her National party finance spokesperson hat, said “all sensible parties” should take a position on superannuation into the campaign.
A policy to raise the KiwiSaver contribution rate, announced last month, was National’s “opening shot,” Willis said, in that the party sees KiwiSaver playing a greater role in people’s retirements.
ACT leader David Seymour agreed superannuation needed to be looked at.
“There is an obvious change that just about every country we compare ourselves with is making, and that is now inevitable in New Zealand. The question is are we going to make that change slowly and gradually in our own time, or have it foisted on us by some financial crisis in the future?”
Edmonds said Labour was not prepared to change the superannuation settings “at this point,” while New Zealand First leader Winston Peters asked what had changed to make people concerned.
“When it’s only 5.2 to 5.3 percent of our GDP, half the imposition that it is in other economies, how can this be the issue?”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
