Finance Minister Nicola Willis outlines the Government's mini-Budget.
Video / Mark Mitchell
OPINION
Commentators are still evaluating Nicola Willis’ mini-Budget and the opening of the Treasury books. Most provocatively, Herald columnist Matthew Hooton is calling today for the Treasury Secretary Caroline McLiesh to resign over the woeful state of the New Zealand economy. He points out that the Treasury boss says that any growth this year and next will be driven “almost entirely by population growth”, and that New Zealanders are going to continue in 2024 and 2025 to become progressively worse off.
Here’s Hooton on the performance of Treasury and its boss: “She has presided over falling living standards, plus extraordinary financial mismanagement, including that revealed by the Auditor-General’s shocking audit report of Labour’s $15 billion New Zealand Upgrade Programme and $3b Shovel-Ready Programme. Unless McLiesh can show the disgraced former Government rejected her advice on economic and fiscal policy and financial controls over such funds, the most honourable thing might be to resign”.
Hooton says that although government spending needed to increase due to Covid, it’s gone from $87b in 2018/19 to $126b in 2021/22 and shows no sign of decreasing, and is forecast to reach $156b in 2026/27. He therefore calls for Willis to “radically right-size the state” by aiming “to slash at least 25 per cent from the central bureaucracy”. He also suggests that Willis postpone the unaffordable tax cuts she has promised.
Finance Minister Nicola Willis’ intended fiscal and monetary goals don’t match up, today's Otago Daily Times editorial suggests. Photo / Mark Mitchell
Today’s Otago Daily Times editorial also suggests that Willis’ intended fiscal and monetary goals don’t match up, and that her wriggle room for achieving the promises is declining fast, and so something has to give.
Like Hooton, the ODT thinks the public service will have to get cut more than expected, and that this will be publicly acceptable: “Growth in the public service across many areas has been substantial. It is all too easy to justify the need for more support, more analysis, more policy, more staff. It is all too easy for managers to try to build their base and power and increase the bureaucracy and the rules. The $40,000 farewell for the chief executive of the Ministry of Pacific Affairs this year was a stark exemplar of profligacy and entitlement. As citizens cut their spending, sympathy will increase for the government putting the squeeze on its costs.”
Herald business journalist Jenée Tibshraeny complains today that Willis didn’t give any greater clarity yesterday about how the Government will carry out its promised tax reforms – both income tax cuts and the return of deductions for mortgage interest residential property investors.
In terms of the income tax cuts, it’s a battle between National’s desire to adjust tax brackets for inflation, and Act’s demand for a flatter tax system of just three income tax brackets instead of five, which accounting consultant Geof Nightingale is cited as believing would favour “the principle of efficiency over progressivity”.
This also has an impact on some of the major spending needed in parts of the public sector, such as healthcare. Today, Hannah Martin reports on the latest New Zealand Health Survey, which suggests that state funding for GPs is far too low, leading to a drastic shortage in provision of primary health. In particular, it means that many people struggle to be able to see a doctor when they need to.
The chair of General Practice New Zealand, Dr Bryan Betty, is reported as saying that greater investment and a redesign of the GP funding system is the “key to a functioning, healthy, health service”.
The integrity of the justice system is called into question, Bryce Edwards writes. Photo / NZPA
According to RNZ, a whistleblower, who worked as a prison guard for seven years at Rimutaka Prison has come forward to suggest that authorities are whitewashing the problems, and that it’s not safe for prison staff to alert managers to the problems. The integrity of the justice system is therefore called into question.
And if you don’t believe that New Zealand has a problem with corruption, it’s worth noting that the Serious Fraud Office has just charged two men “with corrupting and bribing a project manager working for Auckland Council and Counties Manukau DHB” involving an alleged $3.5 million in public funds being misappropriated.
Debates continue into the integrity of major government infrastructure spending, following on from last week’s Auditor General report that was scathing about the accountability and processes behind the scenes when the last government quickly spent $15b on new schemes.
Rob Campbell writes today about the problem, from a leftwing point of view: “I’ve spent a bit of time in public sector agencies in recent years. My strong observation is that there is considerable inefficiency and poor governance scattered across the sector. From my leftist perspective, this is wrong because it undermines confidence in public services and because it limits their effectiveness per dollar spent. The left is, wrongly, often too defensive of poor performance when efficient and effective public service is key to our objectives.”
Coming from a more rightwing point of view, economist Bryce Wilkinson of the New Zealand Initiative has also written in the Herald that greater accountability of big infrastructure spending is what is needed – pointing the finger, not so much at the government, but at the need for greater scrutiny from the media and Parliament of big spending.
Wilkinson says more awareness is needed of the Auditor General’s good work, and the media and opposition politicians have a part to play in preventing corruption and the misuse of public funds.
One section of his article is worth quoting at length: “Enter the Fourth Estate and public opinion. If the mainstream media just treats such reports by the Auditor-General as transient passing news, it will register little with the public at large. Yet, if the public does not mobilise at authoritative, independent evidence of wanton spending, more of it can be expected. Cynicism and corruption would breed. Democracy suffers. The bottom line is Parliament needs to do a better job of holding government to account for spending quality. It would help if the media did a better job of holding both the Government and Parliament to account, thereby sparking public concern and attention. A politically partisan media lets itself and the public down in this respect.”
The ability of the media to be a check on the government is eroding, according to two items today about the state of the Fourth Estate. Duncan Greive provides an in-depth account of the awful year for New Zealand media businesses, and concludes: “The local sector faces a more austere and indifferent government, a recession, an extremely soft advertising market, along with a fiscal cliff (on trend) with the end of a fraught support programme in the Public Interest Journalism Fund (PIJF).”
Greive says that “the overall trend was very troubling” for the health of the media, and “if you talk to senior executives at the large news and media companies in New Zealand, the word being used is ‘existential’”.
Much of this is backed up today by the Herald’s “Media Insider” Shayne Currie, who says that 2023 “was our most tumultuous year ever” and that “local media industry is in a battle with global social media giants who care little about the importance of the Fourth Estate or the impacts that their platforms have on the social cohesion of Aotearoa.
Currie draws special attention to a just-released report on the state of the media sector by economist firm Infometrics for the Ministry of Culture and Heritage. This forecasts that the numbers employed in the media and broadcasting industry are set to plummet – by 2028 the numbers are set to be more than 2600 fewer than that forecast for this year.
The watchdog is concerned about the new Deputy Prime Minister’s “war on the media”, Bryce Edwards writes. Photo / Mark Mitchell
New Zealand’s media has just been pronounced the 13th most free out of 180 countries in the Reporters Without Borders’ 2023 World Press Freedom Index. But the watchdog is concerned about the new Deputy Prime Minister’s “war on the media”, and today calls on the Prime Minister to reaffirm his government’s commitment to press freedom.
The opposition Labour Party looks set to be led by Chris Hipkins going into the next 2026 general election. The defeated prime minister has given an interesting interview to Stewart Sowman-Lund, in which he emphasizes how defeated leaders can come back to have long careers as prime ministers. He draws attention to the cases of Helen Clark and Keith Holyoake who at first stumbled but then succeeded.
Hipkins declares that he’s in a reflective mood, and promises a reset Labour manifesto for 2026. And for a hint of where he’s taking the party, he offers his summer reading list: Mariana Mazzucato’s The Mission Economy, Jon Alexander’s Citizens, Francis Fukuyama’s Identity, and Yuval Harari’s 21 Lessons for the 21st Century.
Labour will have a terrible job trying to reset according to Danyl McLauchlan, who says today that having been in government for six years they now have to defend everything that National is attacking: “They have to defend their legacy – but they did just suffer a serious election loss so there will have to be some public reckoning, an acknowledgment that their second term in government was less amazing than it might have been. But most of the former leaders of that government still run their party and they believe that their ministry was more amazing than they’re given credit for: the Covid response was world-beating, inflation was not their fault and so on. Internally, the party is litigating whether or not the failure to introduce a wealth tax cost them the election. Eventually, they will have to confront a more difficult question and the more proximate cause for their loss: Covid aside, why weren’t they very good at governing the country?”
"Labour lost the Auckland suburbs to National, the urban centres of Wellington and Auckland to the Greens", Danyl McLauchlan writes. Photo / 123rf
His prognosis for Labour isn’t so positive, pointing out that “Labour lost the Auckland suburbs to National, the urban centres of Wellington and Auckland to the Greens, and the Māori seats to Te Pāti Māori. These are three very different constituencies. Which of them are they addressing as they oppose the current coalition Government?” Labour could end up being squeezed into “a mid-tier political entity, a demotion our nation’s oldest political party will be reluctant to accept”.
On National, McLauchlan has a mixed review. The positives include: “Their new intake of MPs seems to be reasonable people (at least by parliamentary standards) rather than the parade of sociopaths and predators it presented to the public during its early period in opposition. Their front bench seems competent and clever.”
But he suggests that Luxon and National aren’t necessarily up to the immense challenges facing New Zealand, and “Most of New Zealand’s dysfunction benefits some vested interest or another and they’ll fight to keep things broken.” And this is his conclusion: “They have no intention of fixing this: the dysfunction benefits their donors and core voters. So instead of turning the plane around we end the year flying without instruments, the engines coughing and the lights dying as we glide over the distant landscape and into the incoming storm. Merry Christmas.”
Finally, some commentators have noted parallels between the 2020 and 2023 landslide elections and those of 1972 and 1975. And today, political journalist Richard Harman elaborates on how the 2020-23 Labour Government has some similarities with the earlier government of Norman Kirk and Bill Rowling, and that there “has been a faint but nevertheless uncomfortable echo of 1975 in Wellington these past few weeks”.
Harman paints a picture of the Ardern administration being akin to the faltering Kirk-Rowling one, in terms of having big liberal ideas that never quite blossomed, and “questions about its profligate spending and its tendency to centralise and control”. Then in came the Muldoon Government of reaction, which just tried to roll back everything Labour had done, without having its own solid political identity for taking the country forward.
The National Party in government 1975 to 1984 also contained a new generation of modernising liberals, who slowly but surely took the party in a different direction, which Harman wonders is also now happening in 2023: “Something similar happened in 1975 when a group of liberal MPs like Marilyn Waring, Jim McLay, Derek Quigley and Mike Minogue all entered Parliament for National. Over the next two terms, in different ways, they would challenge Muldoon and his lieutenants in the Cabinet, and particularly Quigley would work to promote what is now called neo-liberalism as a central tenet of National philosophy. They were ‘small-l’ liberals who, by the time the Bolger government came into power in 1990 alongside their market-driven economic reforms, were also ready to accept the anti-nuclear policy and begin work on substantial Treaty settlements.”
Harman looks at the new generation of National politicians and sees something similar happening, but sees some major challenges for the Luxon Government, concluding: “Can it avoid the Muldoon trap and thus avoid remaining a government of reaction wedded to the way things were?”
