Election 2023: Government books will show path to surplus - Hipkins

Prime Minister Chris Hipkins is quietly confident Treasury will show the Government meeting its fiscal rules, which require a surplus to be forecast in the next four years.

Treasury independently forecasts whether there will be a surplus or not, but the Government has input into whether it wants to increase or reduce spending to achieve one. It releases those forecasts next Tuesday when it opens the books releasing the Pre-Election Economic and Fiscal Update.

Hipkins said he was confident that the Government’s decision to trim $4 billion in spending over the next four years would be enough to hit a surplus, despite a recent downturn in the economy which saw corporate tax revenue in the year to May come in $2b below budget forecasts.

“We’ve set out as a Government our fiscal goals that we are committed to achieving,” Hipkins said.

“We have made changes to the Government’s management of finances evidenced by the $4 billion in savings we announced a week and a half ago, which is our best estimate of what we think it will take to achieve the fiscal goal,” he said.

One fiscal goal is to achieve a surplus within the forecast period, another is to keep net debt below 30 per cent. The goal was set at the last Budget. Currently, the Government forecasts a wafer-thin surplus in 2026 - one year ahead of the end of the forecast period in 2027.

Analysis by ANZ bank reckons the return to surplus will be pushed out another year to 2027, with the surplus amounting to less than $1b.

Hipkins’ message of economic good news was met with laughter from National and Act

Willis said Hipkins’ remarks the economy was in “good shape” showed he was living in “la la land”.

She called on him to drop plans to introduce social income insurance or “jobs tax” when economic conditions improve.

The scheme would levy a 1.39 cent tax on every dollar earned, equating to an $834 tax on an income of $60,000.

“No one in New Zealand believes our ‘economic fundamentals are in good shape’, except, apparently, Chris Hipkins,” Willis said.

“New Zealanders are doing it tough. They deserve competent economic management that gets the economy working to create better jobs, higher incomes, affordable mortgages and a lower cost of living, including tax relief,” she said.

“Was Chris Hipkins laying the groundwork for a Jobs Tax with his comments about our economic fundamentals being in good shape?” she wondered aloud in a statement.

Willis has been critical of the Government’s savings agenda, noting that $1b of the savings came from reducing spending in future budgets - a decision that allows the Government to make the books look good in the short term, but which can easily be reversed when it comes to actually delivering the budget.

Seymour said, “No one buys Labour’s vision for the New Zealand economy”.

He said another term of Labour would mean “more handouts, more strategies and more plans dreamed up by politicians and bureaucrats in sitting in Wellington”.

“New Zealand businesses need world-class public policy that gives them confidence to go out and take on the world,” he said.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.