Capital Markets Report: A credibility gap in the Nicola Willis Budget - Barbara Edmonds

Labour Finance spokeswoman Barbara Edmonds. Photo / Mark Mitchell

Barbara Edmonds was appointed Labour’s finance spokesperson in February 2024. She is a former IRD tax lawyer who was seconded to two National Revenue Ministers before commencing her political career. Edmonds served as Minister of Revenue, Economic Development, Internal Affairs, and Pacific Peoples, as well as Associate Minister of Finance, Cyclone Recovery and Housing during the 53rd Government.

OPINION

For a Budget to be a success, the first check is to balance the books so the economy stays in good shape over time. The second is delivering on promises made to people.

It’s supposed to be the Finance Minister’s moment to open the books and demonstrate economic credibility.

The promise of tax cuts hasn’t cut it for most. Seniors only get a measly $2.50 a week. Fewer than 3000 households are getting the full $250 promised. Yet the amount they borrowed in this Budget to make tax cuts happen is eye-watering.

The income tax changes alone are costing $10 billion. There is $12b of borrowing in this Budget, and debt is increasing, which is already risking our international credit rating. In nominal terms, net core Crown debt increases through the forecast period to peak at 43.5 per cent of GDP in 2024/25.

After all of her rhetoric, this Budget has Nicola Willis running larger deficits than Grant Robertson did, except for in 2020. That 2020 Budget included the wage subsidy, small business cashflow loan scheme and resurgence support payments, which kept businesses going and people in work during the pandemic.

The promise of cancer medicines wasn’t fulfilled either. That’s the worst one in my books - given all of the money spent, National couldn’t find $280 million for a commitment they made to people who are sick or dying, and their families. They still cancelled free prescriptions for most people, but didn’t use the money for medicines as promised. National should never have brought politics into it, and left Pharmac to do the job it was set up for.

And the economy is in worse shape than when National took over. Unemployment is rising, with 27,000 more people forecast to be on a jobseeker benefit next year. Child poverty is set to increase, not just as more people are out of work, but also as a result of National’s changes to indexation on benefits. The money saved from that change is being used for their income tax changes that will also see a reduction in benefits for thousands of people.

Rents are rising, yet the Government has made it harder to be a tenant by bringing back no-cause evictions. The First Home Grant has been scrapped, despite Christopher Luxon saying on the campaign trail that he wouldn’t. And they’ve reduced the budget to build and maintain public homes by $1.5b, while at the same time residential investment over the year to December 2024 is forecast to be nearly 11 per cent lower than in 2023. This means fewer houses being built, despite broad political agreement that there is a housing and infrastructure crisis.

There is massive uncertainty in the construction sector. The Government’s plan so far is to stop, reverse and repeal, which is not how you plan for the future.

Labour’s Wellbeing Budgets were designed to look at the inter-generational issues our country faces and come up with a plan to address it. Investing in hospital infrastructure, schools and classrooms, roading over the longer term. Fixing the hard stuff like the major infrastructure shortfall brought about over several decades. Addressing what actually causes crime - poverty, family and sexual violence, homelessness. Protecting our climate and environment for the next generations of New Zealanders.

There’s little investment where it’s needed in the productive parts of our economy. They’ve scrapped funding for tourism marketing, despite our economy’s reliance on it. They’ve put a lid on Wellington’s science city, and made some of our best and brightest redundant at Niwa, DOC and Callaghan Innovation.

I cannot make the point more strongly that government has a role to play in research and development - we are well behind the rest of the world in this area already.

I am new to the finance spokesperson role, but have spent years working on both sides of the political spectrum, have held nine different ministerial portfolios and have a background in the private sector.

Nobody has ever told me that reduced productivity will see a growing economy. Or direct fiscal stimulus doesn’t drive inflation. Or that cutting investment in infrastructure now will mean it costs less in future.

But that’s what National would have us believe.