“There’s real potential … to deliver better value for New Zealanders at a lower cost,” Rennie told the Herald.
“But they’re not straightforward decisions; they’re not sort of stroke-of-the-pen decisions. That’s why I’ve been very clear that fiscal consolidation will need to happen over a number of years.”
The Treasury has for years warned the Government of the costs associated with New Zealand’s ageing population, the sustainability of universal superannuation for those 65 and older, and the need for New Zealand to broaden its tax base through a capital gains tax, for example.
Ahead of her five-year term at the helm of Treasury ending in September, Rennie’s predecessor Caralee McLiesh sparked a lot of debate, when she articulated this position in an interview with the Herald.
However, Rennie wants Treasury to be more vocal when it comes to putting its policy positions, particularly around the big fiscal and economic issues, in the public sphere.
He believed people wanted to see “a degree of thought leadership” from the Treasury.
“Our first job is serving the Government of the day, but we also have a stewardship role,” he said.
So, where does Rennie believe the Government can find the savings required to pull the books out the $17 billion deficit they’re expected to be in by June next year?
Rennie would look at better targeting payments currently made to everyone, including those who don’t need the support.
Examples of this include the Government covering some tertiary education fees and off-peak public transport fees for over-65s, and making contributions to KiwiSaver members who contribute at least $1043 of their own money over the year.
Rennie noted while this Government contribution, of up to $521 a year per KiwiSaver member, would make a real difference for low-income earners, people like himself didn’t need it.
Much like his predecessors, the sustainability of New Zealand Superannuation is front of mind for Rennie.
“I think the key issue is thinking about, how do we reset our overall system in a way that’s going to be fiscally sustainable, but also fair across generations in New Zealand?” he said, pointing to the workplace-based systems in other countries that see higher contributions made to workers’ retirement savings.
Rennie said Treasury was analysing how the retirement system was working across different generations.
He hoped the analysis, which would be published next year, would help inform debate around notoriously controversial issues around New Zealand Super eligibility.
On the other side of the ledger, Rennie wanted the discussion around tax to go beyond whether one is for or against a capital gains tax.
He questioned whether taxing capital at a lower rate than labour would encourage more saving and investment, which would help individuals save for retirement, and businesses invest more in technology to improve productivity.
Rennie believed New Zealand’s deteriorating economic outlook was a “significant issue”.
“Let’s not panic, but let’s actually sort it out over the next few years,” he said.
However, Rennie didn’t believe the situation was the same as the early ’90s, when Richardson slashed spending significantly.
“By the time the National Government came in in 1990, we’d had about 15 years of governments that had tried, but also failed, to successfully consolidate fiscally,” he said.
“Our debt levels were very high, there was scepticism about whether New Zealand could get its act together, and that drove of set of quite difficult and wide-ranging policy choices.
“I don’t think we’re in that world now.
“I think there is confidence that our fiscal institutions will respond and consolidate over the next few years, and that gives us a really important breathing space that a Government doesn’t have to have some of the same, quite precipitate responses.”
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.
