The IMF is forecasting a gloomy outlook for New Zealand:
Fresh numbers show the Labour-led administration was a big spender even before Covid-19 and New Zealand incomes overall in 2025 might be less than in 2019. . .
The government inherited forecasts of healthy surpluses and squandered them, before Covid-19 struck.
The IMF also forecasts that New Zealand’s real GDP per capita in 2025 will still be lower than in 2019. Only four “advanced economies” have the same dire outlook. By comparison, Japan hovers near the median with a 3.9 per cent increase while Australia is projected to be up by 2.7 per cent.
In 2019, 25 of the 39 IMF’s “advanced economies” had higher average incomes per capita than New Zealand. By 2025 it will be 32 countries. Hong Kong, South Korea, Taiwan and Singapore are now much more prosperous than New Zealand. Even the Irish now have more than twice New Zealand’s per capita income.
What does this mean for Kiwis? It will be harder to afford what other countries can. It also means that Kiwis’ standard of living depends greatly on the quality of government spending. . .
This isn’t just numbers, it is what we can, or can’t, afford to spend on education, health, welfare, infrastructure and all other services the government provides.
When Bill English was Finance Minister he focused on the quality of spending rather than the amount. For the last three years the government has spent a lot more with little if any concern for the effectiveness of the spending.
What can be said about the quality of all that government spending?
Unfortunately, rigorous assessments of value for money in government spending are rare. What is not measured and is difficult is unlikely to be achieved. The Provincial Growth Fund was a particular disgrace but whimsical promises to plant a billion trees or build 100,000 houses without proper justification illustrate the genre. . .
The PGF and billion trees were New Zealand First’s policies and that party is, thankfully, no longer in parliament. But KiwiBuild was a Labour policy. That it was an expensive failure is no guarantee that we’ll be safe from ill-considered mistakes like that in this term.
When all the money being spent is being borrowed it is even more important to focus on the quality of spending and wherever possible reduce the quantity.