New Zealand finds itself at a familiar spot in its history. A new government has come in and is promising to shake things up. It wants to make New Zealand a better place. More competitive. Deliver better public services. This is pretty much like every other incoming government sinceMMP.
What makes this government different though is its commitment to a radical programme of cuts. Cuts to the taxes of those who have already done well over the past 20 years. $3bn for landlords, and income tax cuts that are worth more and more the higher up the income scale you go. All of this is supposed to help tackle the cost of living crisis. A crisis actually being faced by tenants, the poor and those on benefits. This is exactly the group that won’t be helped by their package.
To pay for all this a different sort of cut is needed. Cuts to public services, and to the number of workers who work in the public service. All those bureaucrats we don’t need right? Like DOC workers. Or those working in biosecurity at MPI. Or those at Worksafe keeping our workplaces safe and secure. The list goes on.
But all of this is based upon two fundamental ideas that just aren’t true. The first of these is that the number of public servants has grown exponentially over the past couple of years. The evidence on this is pretty clear from Stats NZ. The number of filled jobs has been remarkably steady over the past two decades – and indeed was higher under previous governments in the 1990s.
The second problem that this government wants to solve is New Zealand’s public debt. The Minister of Finance has been clear, the government needs to cut debt. Except again, the evidence on this is pretty clear too. The Treasury stated in the Budget Policy Statement that our debt was within the bounds of “prudence on debt sustainability”. Translated – that means we’re okay. It also means that we are in no danger – as we were one of the few countries during Covid to get a credit rating upgrade.
New Zealand has seen debt go up – the Covid wage subsidy paid to employers was borrowed money. But when we look at comparable countries, New Zealand’s debt looks very low indeed. The IMF measures our general government gross debt as a percentage of GDP. Australia’s debt is 6 per cent more than ours, the UK, US and Canada all have double our rate. Japan has five times the level of public debt.
Even if these two supposed villains – public debt and public servants – were as bad as the government said (which the data says is not true) then why is the solution a tax cut? The answer is not to be found in economics, but rather in politics. The National Party has never met a tax cut it didn’t like. Cuts are the only tax policy – indeed the only policy - they have. Tax cuts will help the economy, except they won’t. Cuts to public services will make them more efficient, except they don’t. Cuts to regulations make us more productive, except history tells us the opposite.
Finance Minister Nicola Willis. Photo / Mark Mitchell
What is certainly the case is that cutting public servant numbers and services won’t help reduce the public debt. Instead, we now know that the Minister of Finance is going to be borrowing more to pay for the Government’s tax cut programme. So borrowing is okay if it’s for landlords and higher income earners?
The answer here is that the real villains in New Zealand will only be helped by this programme. We have a $210bn public sector infrastructure gap, and you can see the start of this in massive council rates bill increases right now. That will get worse. Child poverty indicators have all turned, meaning more children are stuck in the worst situations. That will get worse. Unemployment which had been at record lows will climb by nearly 40,000 according to Reserve Bank forecasts. Cuts will add to this.
So let’s get real. The government is pretending that if we cut public servants jobs, or tackle a non-existent debt crisis, we will all be better off. We won’t. We will simply have fewer people in work and a poorer public realm. Whilst rents rise at a record rate and we repeat the mistakes of the past. Let’s not do that – let’s tackle the real villains in Aotearoa, not the innocent.
·Shane Te Pou (Ngāi Tūhoe) is a commentator, blogger and former Labour party activist.
