New Zealand First leader Winston Peters. Photo / RNZ, Samuel Rillstone
New Zealand First’s manifesto includes promises for some of the biggest cuts to Government spending forecasts seen in recent times in New Zealand, slashing about 7.3 per cent of public spending in its first year from the current track, equating to a $10.4 billion cut.
But the party is also promising massive increases to Government spending, which one economist has estimated to be worth about $20b over the four-year forecast period.
This is according to NZ First’s party manifesto, which was released just before TVNZ’s minor parties leaders’ debate last week.
These spending increases are largely unfunded, meaning the party’s promise to increase spending while at the same time cutting spending probably leaves a hole of some shape or size in the party’s manifesto promises. However, as NZ First has not published a fiscal plan, it’s impossible to determine what that is.
The party’s key spending reduction promise is to cap total Government expenses at $165b, and core Government expenses at $133b, for the 2024/25 year.
Treasury’s Prefu forecasts say total spending and core expenses will be $180.5b and $142.4b in the 2025 year. To hit the targets would require a $15.5b cut to total spending and a $10.4b cut to core spending.
Infometrics chief executive Brad Olsen, who vetted the fiscal plans for Labour and the Greens, has provided an analysis of NZ First’s manifesto to the Herald.
“I don’t know if you can have a “fiscal hole” without a fiscal plan - there’s not enough detail to be able to determine NZF’s fiscal commitments broadly,” Olsen said.
“What I would say is that there’s been considerably scrutiny of fiscal positions in the 2023 election. Treasury stated clearly in the Prefu that there were difficult trade offs to be made. The current information from NZ First on their fiscal outlook suggests a number of larger spending commitments, alongside substantial cuts to spending in other areas, without any real scrutiny or detail for voters to be able to assess.
“It’s impossible to determine NZF’s fiscal position, but the details available in the NZF manifesto suggest a number of larger spending commitments that aren’t funded, alongside substantial cuts that aren’t detailed.”
Peters did not agree to be interviewed by the Herald but said he had a “more senior economist who doesn’t have a conflict and that is why our settings are realistic”.
In a statement, Peters said the decision to put a lid on spending was not a “cut“ because that funding had not been committed yet and would still be an increase on previous years.
He noted that NZ First’s spending levels would see core Crown spending remain over 30 per cent of GDP - higher than when the Labour Government took office in 2017, with the help of NZ First.
In a statement, Peters said “our plan is to get New Zealand back to surplus, which will reduce the pressure on interest rates and inflation. This is why we speak of the need for a mini-Budget as the spending track and the cost of servicing debt is unsustainable. We also want to open the books straight after the election - because we don’t trust the figures there now”.
The manifesto, along with promising cuts to public spending, also includes massive spending increases, including a policy for the Crown to step in and pay superannuitants’ rates. The cost of this policy changes depending on what page of the manifesto you read. On page five, NZ First costs the policy at $1b-$1.2b, but by page 11 the cost has more than halved to $480 million.
Peters said the figure was an “estimate for this term of Parliament, taking into account inflation through to 2025/26, noting the policy would not commence until 1 July 2024″.
He said the $480m figure represented the cost for the current year (2023/24) “for illustration”.
Some of the party’s policies were very expensive indeed. NZ First wants to make the first $14,000 people earn tax-free by April 1 2027 at the latest, giving people an effective tax cut of $1,470 a year.
But that comes at a hefty cost. Using current data, Olsen estimates the tax change would be a $4.7b hit to the Crown coffers if implemented in 2024, rising to $5.9b if implemented in 2027.
Peters said the cost of this is why the party had pushed it back to 2026/27.
“We are the only party not promising sunshine and unicorns with taxes and are being honest. We want reform this term, but know it may be 2027 before we can deliver. The economy comes first,” he said.
NZ First also wants to match National and Act’s pledge to restore interest deductions for residential landlords, which will ultimately cost about $760m.
NZ First has two big health policies. The first is $1.3b for medicines, which Olsen assumes to be a four-year spend, meaning $325m a year.
NZ First also promises to create a $925m a year “Waitlist Reduction Fund”, adding $3.7b over the four-year forecast period.
Peters defended this spending, saying “by not tackling the waitlist, we pay elsewhere”.
Olsen calculated that a pledge of 500 additional police every year would cost $70m, based on a cost of $140,000 an officer, a figure used to cost a similar policy in 2018.
The party is also promising two free doctor visits to SuperGold Card holders. Olsen reckons this would cost about $36.7m a year, based on Stats NZ data for a GP consult for an adult without a community services card and the latest estimates of SuperGold Card holder numbers.
The party wants to lift spending on defence to hit the target of 2 per cent of GDP used by members of the Nato alliance. NZ First wants to hit this target by 2030, which falls outside of the forecast period.
Assuming spending begins to immediately lift to hit this target by 2030, Olsen recons the cost of the policy would be around $10b between 2023 and 2027, based on the most recent Treasury forecasts.
The party also wants to double the video game subsidy rate from 20 per cent to 40 per cent for developers who spend more than $600,000 here.
Those extra costs amount to about $20b, and do not include every commitment in the manifesto.
The manifesto does include some promises likely to save money and increase revenue. It promises higher royalties to the Crown from mineral extraction, and lower benefit costs thanks to NZ First’s promise to limit the amount of time people spend on the Jobseeker benefit.
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.
NZ First minister Shane Jones loses a tooth while giving a speech in the House at Parliament this week. Video / Parliament TV