Roger Douglas disappointed with Act, praises NZ First on response to fiscal challenges

Sir Roger Douglas thinks the Government isn't taking the fiscal crisis seriously enough. Photo / Paul Taylor

Act founder Sir Roger Douglas has expressed disappointment at his party’s response to this week’s bleak Treasury forecasts.

He says the libertarian direction Act has taken has meant it is not proposing the right solutions for New Zealand’s fiscal challenges and he warned that the party might be “sending NZ bankrupt”.

Instead, Douglas praised NZ First MP Shane Jones’ response to the figures, made in an urgent debate in Parliament.

“NZ First, and I never thought I would say it, are showing more understanding of the issues involved than anyone else, or is that limited to Shane Jones?” Douglas said. It’s not quite clear what part of Jones’ debate on Hyefu (Half Year Economic and Fiscal Update) Douglas admired. The most significant policy prescription Jones shared in the speech related to fast-tracking.

Act and NZ First are often seen as bitter rivals. Both were created in the 1990s in response to the radical reforms of that era. Act’s founding philosophy was to take those reforms further and NZ First was founded in part to roll some of the reforms back.

This is not the first time Douglas has criticised his former party. In 2023, he professed to be a “swing voter”, saying Act was overly focused on lowering taxes for the wealthy, rather than lowering taxes for the poor.

His remarks this week came in a rare press release from him after the release of Treasury’s Hyefu forecasts which showed New Zealand’s deficit, measured by the old Obegal (operating balance before gains and losses) indicator, will not close before the end of the decade.

Douglas is not concerned only with this. He is also worried about earlier forecasts from Treasury showing the annual bill for health will rise from 7% to 10% of GDP (an additional $12 billion a year in today’s terms) by the 2060s. Superannuation expenses will rise from 5% of GDP now to about 7.6% over the same period.

He was not enthused with Act’s response to the Hyefu.

“While Act may be better than the other parties in the NZ Parliament on most issues, it does not matter when you are the best on those issues when you are sending NZ bankrupt,” Douglas said.

Responding to the comments, Act leader David Seymour said he was an “enormous personal admirer of Sir Roger – his contributions to New Zealand are legendary”.

“I wish him well. However, it’s much easier, I imagine, in hindsight than in the present,” he said.

Douglas noted it was almost exactly 40 years since he was sworn in as a Minister of Finance in the Fourth Labour Government, his first party.

“We were able to fix the problems the country faced because we were big enough to put politics aside, and implement the policies required to do so,” he said.

This week, Douglas said this Government was not up to today’s challenges in the way the Fourth Labour Government faced the challenges of its time.

Watching the Hyefu debate, Douglas said, it became clear “the present National Party-led Government [National, Act, NZ First] was not up to the difficult job they face”.

“They are clearly not prepared to put in place the long-term quality policies required of them. They may well be better than the left, but only marginally so, so does it really matter?”

In an interview with the Herald, Douglas said he had not spoken to Jones.

“He at least is looking forward and trying to put forward ideas and policies that are trying to make a difference. I’m not sure where NZ First is on the issues I think are important.

“We are in trouble. There’s no doubt about that. We’ve got a big deficit, each year we’re adding to the debt. There’s no sign we’re going to do anything about that.

“You’ve got that structural deficit there which is a big problem, but coming up on the horizon is an increase in government expenditure of over 8% of GDP in health, super [and] education. It’s 8.1%, according to Treasury,” Douglas said.

He said adding these social services deficits to the current one would lead to a debt crisis.

Richard Prebble and Roger Douglas. Photo / Mark Mitchell

Douglas’ solution would be a form of self-funding social services. New Zealanders would be given large tax cuts, but they would be encouraged to use those cuts to pay for schemes that would pre-fund the services they drew on when they aged, like health and superannuation.

In the current system, today’s superannuation expenses are paid for by today’s taxpayers – which Douglas described as a “Ponzi scheme”.

“Act had the policies to solve this. It’s what we were set up for. We wanted individual New Zealanders to save, to look after themselves in health and in super and in retirement,” Douglas said.

Instead, Douglas argued that “libertarians within the party ... essentially took over”.

“Rodney Hide and David Seymour, both being libertarian, don’t believe in welfare and basically they – this is what they really believe, not what they talk about – they think charity will do it and people should save for themselves and it’s not compulsory.”

The former minister said the party took this direction in the early 2000s under the influence of what was then the Business Roundtable.

Douglas, by contrast, said he did believe in the social safety net, but one that was self-funded through savings.

Thomas Coughlan is deputy political editor and covers politics from Parliament. He has been with the Herald since 2021 and has worked in the press gallery since 2018.