An economist is predicting Labour could end up borrowing more than it planned for this year’s Budget given the “immense competing interests” it is facing.
In a speech in Auckland on Thursday, Prime Minister Chris Hipkins described next month’s Budget as a “no frills” affair with no major tax changes.
Cameron Bagrie - who runs Bagrie Economics - told RNZ the Government had a “real balancing act” on its hands and some “big considerations” beyond the election.
Labour needed to dial back spending to try to reduce inflation, Bagrie said, while also responding to the intense pressure to provide cost-of-living support, increase public sector wages, and drive the cyclone recovery.
“How the hell are they going balance that up? Obviously, you don’t want to increase taxes in an election year. No one really wants to cut back on spending - it’s difficult.
“Maybe the sacrificial lamb here - in regard to what gives a little - is borrowing a little bit more over the next couple of years.”
Treasury has estimated the repair bill from Cyclone Gabrielle and the Auckland floods will add up to between $9 billion and $14.5 billion.
Bagrie said that figure was “decidedly light” when taking into account the overall challenges of managed retreat and inadequate infrastructure.
“There’s a long-term wake-up call in regard to what we need to be doing to manage the risk around climate change - and that bill is going to be large.”
Prime Minister Chris Hipkins says there will be no major tax changes in next month's Budget. Photo / Mark Mitchell
Gisborne mayor Rehette Stoltz said she was deeply relieved to hear Hipkins’ commitment to the cyclone rebuild.
“Life is tough in the Tai Rāwhiti right now,” she said. “We are grateful the Government is saying to us, ‘we are here to walk alongside you and your community because you matter’.”
National leader Christopher Luxon said he remained sceptical of Hipkins’ promised fiscal restraint.
“Four months out from the election, Chris Hipkins has all of a sudden discovered that actually... being disciplined [when] spending taxpayer money is important. Well, it’s always been important.”
ACT leader David Seymour said the Government should not be applauded for not introducing more taxes.
“This government needs a much bigger diet than they’re proposing. If you think about it, the idea that they’d expand expenditure that much and then add new taxes as well, would be truly extraordinary.
“I don’t think ruling out new taxes is that remarkable.”
Greens co-leaders James Shaw and Marama Davidson. Photo / Mark Mitchell
On the flip side, Green co-leader Marama Davidson lamented Labour’s unwillingness to use its majority to make the tax system fairer.
“No nothing, no frills, so more Green MPs are the only way that New Zealand will actually have a government to rebalance wealth through the tax system and provide everyone with what they need to live a good life.”
