As for net debt, National is pledging to ensure this is only 2 per cent lower than Labour is committing to by 2026-27.
At a high level, the numbers in the two parties’ fiscal plans are similar. The difference between them lies in their tax-and-spend plans; how they want to distribute the costs and benefits of public services across society.
National is mainly aiming to generate more revenue than Labour by taxing foreigners for the pleasure of buying relatively expensive New Zealand houses. It also wants to tax those who directly benefit from new infrastructure through tolls, targeted rates and congestion charging.
National is aiming to save money by requiring the public sector to cut costs, and by increasing benefits by less than Labour would – indexing these to consumer inflation rather than wage inflation.
National would use the money saved and gathered via new taxes to give working people and residential property investors tax cuts.
Of course, it would do a number of other things differently to Labour, but these are a few of the big ones – in dollar terms.
Labour’s flagship tax policy, to remove GST from fruit and vegetables, would be paid for by taxing commercial and industrial property owners more by removing the ability for them to deduct depreciation as an expense.
National has committed to making the same change, which would cost property owners $525m a year.
As for capital expenditure on roads, hospitals, classrooms etc, both major parties have committed to spending the same amount.
So again, net debt and the Crown’s deficits/surpluses are likely to look similar in nominal terms regardless of whether the next government is led by Labour or National.
The big disclaimer is that this is based on both parties spending what they say they will.
Economists don’t believe foreigners will buy enough houses to generate the $750m a year of tax revenue National is banking on.
And while the current Government has had to contend with an unforeseen pandemic and cyclone, it has typically spent more than it had planned, as it has avoided making cuts to pay for new demands or cost pressures as they’ve arisen.
While it’s important for politicians to spell out their fiscal plans and be held accountable to them, the reality is they’ll likely change.
Furthermore, most people vote on policies, values and vibes.
As outlined above, the differences between National and Labour when it comes to the treatment of income taxpayers, property investors and beneficiaries are quite stark.
The nature of how these policies influence people, whose interactions create an economy, is what’s important.
Net debt or the Budget surplus/deficit may be similar under either major party’s leadership in nominal terms, but how they end up looking relative to the size of the economy is more relevant.
Will parties’ policies promote sustainable growth, or will they exacerbate inflation, causing interest rates to remain higher for longer, stymying investment and creating job losses in the process?
What are the opportunity costs attached to the parties’ spending plans?
Could Labour use that half-a-billion dollars a year dedicated towards removing GST from fruit and vegetables (to the benefit of supermarket companies) to pay down debt faster and reduce the Government’s interest costs, expected to hit a whopping $9.8b by 2026-27?
Would National actually bank savings made by limiting welfare payment increases, or would these go towards it spending more on people ending up in hospital because they can’t afford the basics required to be healthy, let alone preventative healthcare?
Rather than fixate on high-level numbers in fiscal plans, voters will also ask themselves what the costs are to future generations of wasteful spending at one end of the spectrum, or underinvestment at the other.
Both parties are pledging to reduce the former and ensure we don’t have the latter – when it comes to infrastructure at least. This is a good thing. Execution will continue to be the challenge.
While it’s good to have the two parties’ fiscal plans in writing, voters should remain laser-focused on the tradeoffs and prioritisation underpinning the numbers.
Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
