Shades of 80s agsag

North Otago was particularly hard hit by the agsag of the 1980s.

The problems with farms that were too small to be economic units were compounded by recurring droughts.

Inflation and interest rates were high, input costs were too and the axing of subsidies by the Lange government resulted in very low prices for stock. Returns were so low that farmers were getting bills from meat works because what they earned didn’t cover the costs of transport and killing.

Some predicted farmers would be forced off their farms in their thousands. Some were but there was safety in numbers – banks and stock firms knew forced sales when there were few, if any potential buyers, would only depress land values further and worked with farmers to allow them to hold on until things improved.

Farmers’ adult children left for education or work elsewhere and at least one partner, usually but not always the wife, went to town for work, earning enough to keep farms and families afloat.

However,  people and businesses servicing and supplying farms were hard hit. Jobs were lost and businesses failed.

The current situation isn’t too bad for those in dairying or cropping but beef returns are only just okay and it’s horribly reminiscent of the 80s agsag for sheep farmers.

Widespread drought, shearing costs which exceed the price of wool and low returns for lambs and sheep mean few who depend on these stock for their income will be making a profit.

Stock and real estate agents are already telling some sad stories and at least one in many farming partnerships is looking for work off farm.

Low prices for sheep meat are partly due to sluggish markets in China and partly due to an over supply in Australia.

Demand for by products including pelts and tallow is also contributing to low returns.

Why wool prices are so bad is hard to fathom. It ticks so many green boxes – free range, renewable, natural . . . and it’s versatile. Strong wool is now not only used for carpets, it has a variety of other uses including cosmetics, surfboards and coffins.

A silver lining to the low price for wool is that it is relatively cheap to use in research for what might – fingers crossed – lead to another wool boom.

That won’t come soon enough for too many who are feeling like they’re back in the 80s and contemplating giving up.

Some who can will sell. Others will hang on, hoping and praying that rain will come before it’s too cold for pasture growth and demand for sheep meat and wool will bounce back, as it eventually did when the ag was over.

Labour’s legacy

When politician’s retire, commentators remind us of what they’ve achieved and that’s usually positive.

The reaction to former Finance Minister Grant Robertson’s resignation has been less so, including this from the Taxpayers’ Union newsletter:

LEAKED: a former senior Treasury official on Robertson’s legacy 😬

. . . Your humble Taxpayers’ Union was accidentally CC’d into an excellent appraisal by a former senior Treasury official we ought not name. 

Robertson’s departure is a reminder of how much worse what seems like everything has become under his watch – monetary policy mess ($12 billion lost and inflation to boot) including pathetic RBNZ appointments, neutering the Productivity Commission, banning gas and oil exploration, making us more dependent on Australian coal, fiscal balance in “structural deficit”, spending up by about 6% of GDP since 2017, net core Crown debt up by about 22% of GDP, working age welfare dependency up alarmingly, school truancy and under-achievement, hospitals an organisational mess, nurses and others fleeing to Australia, GP shortages developing, tertiary vocational training a shambles, 6 years on RMA a wasted effort, Treasury looking anaemic. Perhaps $30 billion to buy overseas carbon credits to 2030, while major countries will not keep to Paris Agreement net zero targets.  No material difference to climate change, so at a major cost of NZers material wellbeing. Add to that the destabilising’ co-governance that increasingly really meant a co-sovereignty ‘partnership’. And this guy apparently wanted a wealth tax.

To what extent was he a restraining influence? I have no idea.

But he and Labour MPs will now jeer at this government for failing to fix these problems fast. . . 

This isn’t just Robertson’s legacy, it’s Labour’s legacy.

We will all be paying for it for a long, long time and the coalition government will be criticised for tough medicine needed to fix the ills Labour inflicted on us.

Let’s get radical

If there is a silver lining to the cloud of fragility under which New Zealand lies, it is the opportunity to get radical.

The government is not trying to disguise the abysmal state of the economy and the need to make hard decisions. Nor should it.

The public must accept the seriousness of the many ills the government has inherited and that tough medicine is needed to treat them.

It’s not unlike the multiple problems the first Lange government faced in 1984 that enabled it to undertake much-needed radical reforms.

There’s a debate to be had over how those reforms were implemented and the pace of them, especially as they affected farming, but it’s difficult to dispute they were necessary.

The current coalition government faces a similarly serious situation and it must have the courage to get radical about sorting it out.

Finance Minister Nicola Willis has called for all government departments to make cuts but that won’t be enough.

A close examination of every state-funded entity must be made. Some must be disestablished and all must justify every cent they spend and be accountable for the value they provide with public funds.

When core government areas like education, health and roads are in such a parlous state there is absolutely no money spare for anything but necessities.

That will be a radical approach when contrasted with the profligacy of the previous government but it’s essential if the government is to fulfil it’s promise to get the country back on track.

Labour govt of waste

Waste was one of the defining characteristics of Labour’s six years in government.

Steven Joyce explains:

The Treasury’s Briefing to the Incoming Minister of Finance, released a week ago, is a fitting tribute to the previous government’s woeful management of the country’s books.

It is worth dwelling on some of the numbers contained in it. Total Crown expenditure grew from 36 to 41 per cent of our whole economy over the last six years, elbowing aside the private sector and Kiwi families. Expenditure in the year to June 2023 alone was 83 per cent higher than the same year six years ago. These are phenomenal increases, and they should be Grant Robertson’s political epitaph. Aside from the early Covid spending, never has so much been spent, yet so little achieved. . . 

Spending so much more, adding so much debt is bad enough. Doing it with little if anything positive to show for it makes it so much worse.

As a small isolated economy prone to natural disasters, we need to keep our debt lower than most others, not the same or higher. Michael Cullen may have proudly “spent the lot” in his final budget but Grant Robertson went one better and depleted the piggy bank as well.

Cullen’s we’ve spent the lot left a big hole for the incoming government to fill in 2008. Robertson’s is worse because so much of the wasteful spending was borrowed money.

Despite all this extra spending, everywhere you look the performance of the public sector has gone backwards, and there are clues in the document as to why. As the Treasury coyly puts it we need to move from “a focus on defining performance purely in terms of expenditure and outputs to one that incorporates quality of delivery and results”. The voters were well ahead of them last October. . . 

Mistaking more spending for better spending was one of Labour’s biggest fault, and one that at least some of the public service made too.

A quick glance across all the non-Treasury BIMs reveals a chorus of “cost pressures” and an urgent “need” for boosts in spending, not cuts. Some of those pressures will be real, and some of them will be borne out of a public sector which has become used to cashing cheques for whatever it thinks it needs rather than doing the hard job of getting better value for money from the money it’s already spending. The Cabinet’s job will be to work out what pressures are real and fund them while making up for those with a higher level of savings elsewhere, plus a major change in culture across the public sector. . . 

The government has a huge challenge to sort out the wheat in the public service from the wasteful chaff.

It has made a start in getting rid of the several boondoggles including Auckland’s light rail project, the Lake Onslow Battery plan and publicly funded cultural reports.

It must find many more ways to cut costs while improving public services and addressing the infrastructure deficit.

The previous government’s wasteful spending was one of the big contributors to domestic inflation.

This government’s determination to stop the waste will play an important part in getting inflation back below its upper target and help with the cost of living crisis which is hurting so many.

Lower still high

The good news is that inflation is lower than it has been:

New Zealand’s consumers price index increased 4.7 percent in the 12 months to the December 2023 quarter, according to figures released by Stats NZ today.

The 4.7 percent increase follows a 5.6 percent increase in the 12 months to the September 2023 quarter.

“While this is the smallest annual rise in the CPI in over two years, it remains above the Reserve Bank of New Zealand’s target range of 1 to 3 percent,” consumers prices senior manager Nicola Growden said. . . 

The bad news is that it is still above it’s target :

Finance Minister Nicola Willis has welcomed the decline in the inflation rate but says there is still more to do. . . 

“It’s good to see inflation coming down, but there is more work to do. Rampant inflation in recent years has created a cost-of-living crisis for Kiwi households who have been pummelled by steep price increases.  . . 

“The previous government had its foot on the spending accelerator while the Reserve Bank had its foot on the brake.

“Our Government understands that inflation is the thief that erodes the real values of people’s incomes and savings. We are focused on removing excessive inflation from our economy and won’t be satisfied until we have.” 

It’s nearly three years since inflation breached the upper limit the Reserve Bank is directed to keep below.

That’s three years of costs rising too fast and we’re all paying for it with interest rates higher than they would be if inflation had been contained.

The previous government’s wasteful spending is one of the bigger contributors to inflation.

The current government’s challenge is to stop the waste and ensure that every cent it spends is spent wisely and well.

Govt feeding debt monstor

Labour announced its fiscal plan yesterday.

The party is trying to persuade us to ignore the past six years of mismanagement and believe that they will do better in the next three.

Labour’s Fiscal Plan will be a work of fiction like all of their other documents. They are addicted to spending and break every spending commitment they ever make. pic.twitter.com/CnlBxccwKL

— Christopher Bishop (@cjsbishop) September 26, 2023

The Taxpayers’ Union’s debt clock shows the size of the problem.

As Government debt continues to pile on, the tax burden on the next generation of taxpayers continues to grow. This means that in the coming years, more and more money will be spent on paying back debt and interest resulting in less money for core government services like health and education.

The party that’s been feeding the debt monster that’s devouring the country’s public finances can’t be trusted to tame it.

Who spends our money best?

One clear message from last night’s debate between National leader Chris Luxon and Labour leader Chris Hipkins was a belief in who spends our money best.

National’s policies allow us to keep more of our own money and put trust in locals to address local issues.

https://twitter.com/NZNationalParty/status/1704043286611341483

Labour’s take more, redistribute it expensively through the public service and take a centralised approach to local problems.

The difference comes down to the belief in who’s better at spending our money – us or the government.

It comes down to which party we can trust to deliver.

https://twitter.com/NZNationalParty/status/1704046178185482713

It also comes down to who can get the economy growing to enable people to do things for themselves and so the government can afford what’s needed for better outcomes in education, health, infrastructure and other necessities.

Labour’s had six years showing it can’t do that. It hasn’t got the policies to do it, especially with the handicap of the Greena nd Maori parties in coalition.

National understands that economic management is fundamental to the country’s success and has the policies to do it well.

National will deliver.#GetNZBackonTrack #PartyVoteNational #TVNZdebate pic.twitter.com/4RSDk2eyBf

— NZ National Party (@NZNationalParty) September 19, 2023

Vote them out #24

Thanks to Ruth Richardson’s Fiscal Responsibility Act, government’s can’t hide what they’ve done to the country’s books.

The sorry state of the country’s economy will be laid bare in the Pre-election Economic Fiscal Update (Prefu) today.

It will be evidence of Labour’s over-taxing, wasteful spending and legacy of debt.

That debt was approaching $158 billion in May’s Budget. It will be worse now.

Just how bad the debt is will become clear when the Taxpayer Union launches its debt clock outside parliament with a sausage sizzle between noon and 1pm.

The debt and the interest on it will be a handbrake on the economy, and on future government’s ability to properly fund services and infrastructure for decades.

Labour’s economic incompetence is a very good reason to vote them out and allow a National-led government to get the country, its economy and all it funds, back on track.

From pride to embarrassment

Bruce Cotterill’s pride in New Zealand is turning to embarrassment :

. . . I’d like to think I’m proud to be a New Zealander. I was born here, educated here and had my first jobs here. I watched my parents work hard here and learned the value of working to get to a better place.

As I travelled overseas, I was always a Kiwi. And a proud one. When you travel, the All Blacks, Team New Zealand and people from the past like Sir Edmund Hillary and Bruce McLaren seem not so far away. Typically, we are passionate about our country, and for good reason.

But that passion is gradually fading. We hear people talking about leaving. They’ve had enough.

This week, two events in particular stopped me in my tracks and forced me to question my pride in my country.

First, I was sent an article that had appeared online. The headline alone stopped me. I sent a note to an economist I know. “Can this be true?” “Yes,” came the reply.

Gee, I thought. I know we’re not going very well at the moment, but are we really that bad?

The second incident occurred on the campaign trail. For some reason known only to itself, the Government decided to make government spending a headline. Almost gleefully, it announced that, in responding to the cost-of-living crisis, its new economic policies would include a $4 billion cut to government spending over the next four years.

Four billion dollars in savings. That sounds like a lot – and it is. But it’s not. One of the problems with politicians is that they throw out numbers. But a number on its own says nothing. To be useful, a number must be comparable with another number.

Four billion in planned savings! Both the PM and the finance minister championed the announcement as something special. In doing so, they are either being deliberately misleading or they don’t understand what they’re talking about.

The problem with the $4b announcement is the lack of relativity. So at the risk of boring you for a few paragraphs, allow me to put some context into those $4b savings.

When the Labour-led Government took over the Treasury benches in 2017, total Crown expenditure was $99b a year. Over the previous five years – 2012 to 2017 – that number had grown from $92b. So the total growth in government spending immediately before their arrival was $7b, or 7.6 per cent, over that five years, about 1.5 per cent a year.

In the five reported years since 2017 (2023 results are not yet published), our total government expenditure has gone from $99b to $151b. The increase in total Crown expenditure in that time is $52b, or almost 9 per cent a year.

Covid spending accounts for some, not all of that and not all of the covid spending was wise spending.

As if this wasn’t enough, in the 2023 Budget unveiled in May, the Government announced plans to spend an additional 32 per cent over the four years to 2027. This would amount to a further increase of $92.5b, on top of the excessive spending that has been allowed to build up over the past five years.

This despite the evidence that the tax take is no longer meeting expectations, as company tax in particular is hit by the early stages of what might be a prolonged downturn. Most people in most households will understand that increasing expenditure more rapidly than revenue is a recipe for disaster.

As a result, we also learned during the week that the Government is going to have to borrow an additional $15b over and above what was budgeted to see it through the current shortfalls.

So this Government, which has taken our borrowing from $60b to $160b in just six years, and our total annual government spending from $99b when they took office to over $150b today, with plans for another $92.5b over the next four years, appears to see cause for celebration in its announcement that it will cut that future spending by $4b – which I assume makes the total increase “just” $88.5b!

Here’s what worries me. In order to solve a problem, you have to first understand it. If they think $4b makes a difference to the country’s prospects, they don’t understand the problem.

But then the $4b play is just that. A play. A headline in the scramble for undecided voters. It’s a drop in the bucket. We don’t need to save $4b in the next four years. Given this Government’s reckless approach to spending our money, we need to find $40b of savings in a hurry if we are going to rescue this country. . . 

And then this week came that article I mentioned earlier. It says the latest International Monetary Fund data projects the NZ economy to have the second-lowest GDP growth in the world in 2024, placing us in 159th place out of 160 countries, alongside Italy. Fortunately, we were beaten into last place by Equatorial Guinea.

Just consider that. That means our GDP outlook for 2024 is worse than almost every basket-case economy, every war-torn country, every collapsing state, except for one. Worse than Zimbabwe, Greece or Venezuela.

My pride is quickly turning to embarrassment. Because I feel we should be doing something about it and people like me should be helping. But at the same time, we are powerless to do so, as long as those in the Beehive continue to fail to understand the problem.

As our politicians repeatedly fail us, there is an interesting question. At what point does incompetence become negligence? . . 

The facts are starting to assemble and the reality is that New Zealand’s economic measures are woeful on every front.

As we face an election, there are voters questioning whether they can trust those who would replace the current mob. Surely, even the most strident Labour Party supporter must be coming to the conclusion that, when it comes to running the economy, the least trusted option is the incumbents. A new Government is unlikely to be worse.

As we line up to borrow another $15b, we should be ashamed of the money wasted. A would-be media merger, a cycle bridge and a light rail line to nowhere. Millions spent with nothing to show for it. . . 

The increased spending would be too much even if it had been spent well, but so much has not been.

All those billions, so much of which has been wasted on boondoggles, have added to debt which has to be serviced and repaid.

And in spite of all those billions we’ve got cost of living, education and health crises, infrastructure is failing and inflation is more than twice the upper limit that the Reserve Bank is supposed to keep it at.

It was obvious before Covid struck we couldn’t afford the government. It’s got worse since then and we certainly can’t trust the people who got us into this mess to get us out of it.

Worst govt leaves NZ worse

There is some good news about the primary sector:

. . . Food and fibre sector export revenue has performed remarkably well during the disrupted global trade period to date. Food and fibre sector exports were expected to increase 6% to $56.2 billion for the year to 30 June 2023. As at 21 August 2023, provisional data for actual export revenue for the year to 30 June 2023 was $57.4 billion.

But the outlooks is not so rosy:

Looking ahead to the year to 30 June 2024, food and fibre sector export revenue is forecast to remain flat at $56.2 billion, with strengthening export revenue in dairy, forestry, horticulture, and seafood sectors offsetting weakening export revenue in meat and wool and processed food and other products sectors. . . 

I don’t know what the strengthening export revenue for dairy is based on. It’s certainly not being reflected in the forecast milk payout.

That combined with poor returns expected for meat and wool is already being felt with the ANZ  Truckometer heavy traffic index dropping for the second month:

. . . Chief economist Sharon Zollner said the fall in trucking activity pointed to a primary sector under stress and a pullback in retail spending.

“We’ve seen two reasonably chunky falls now in both June and July in the truck traffic,” Zollner said.

“Traditionally that has been an indicator of weak activity across logging, construction and retail because firms don’t need to restock so much. It does tend to be pretty correlative with the GDP data.” . . 

The latest drop in the heavy traffic activity also reflected weak momentum in the Chinese economy, with decreasing demand for logs.

“The primary export sector is under particular pressure at the moment,” Zollner said

The latest data supported the anecdotal evidence of an economy under stress, she said. . . 

Retail spending is also reflecting economic stress with a one percent fall in the June quarter.

And insolvencies are increasing too:

The late Robert Muldoon infamously said his ambition was to leave the country no worse than he found it.

This government has left it in a much worse state.

Judith Collins sums it up:

Mildly sad to see some Labour MPs today being forced to cheer the worst government ever, a government that has divided our country, let down children, cuddled up to gangs, politicised education, and run up massive debt that New Zealanders will be paying back for years to come.

— Judith Collins (@JudithCollinsMP) August 31, 2023

 

NZ 159th in world

The government is belatedly admitting that it has to cut costs:

Reacting to today’s announcement that the Government intends to cut costs amounting to $4 billion over four years, Taxpayers’ Union Campaigns Manager, Callum Purves, said:

“This is too little, too late. Government spending has increased by 68% since 2017 yet there is nothing to show for it except out of control cost of living and ballooning government debt. Taxpayers’ Union – Curia polling shows that despite massive increases in spending, most New Zealanders think key public services have actually got worse.

“Kiwis have been struggling with rampant inflation and the rising cost of living for the past two years yet it seems the Government has only just realized that they are the cause of these problems. We need cuts of $40 billion in one year, not $4 billion over four.

“With this underwhelming announcement, at least the Government has demonstrated that it is possible to reduce spending without reducing core services. The Government needs to show some courage and unwind the damage of the past few years’ excessive wasteful spending and deliver meaningful spending cuts to the tune of tens of billions of dollars.”

It’s too little too late to get us off the bottom of the IMF’s rank for GDP growth.

Robert MacCulloch reports that the IMF ranks New Zealand 159th in the world for GDP growth:

What has PM Hipkins done? The newly released IMF Regional Economic Outlooks say NZ is projected to be the worst performing economy in the entire world in 2024 in terms of GDP growth, with one exception, Equatorial Guinea, which has been ripped apart by conflict. No other time in our history has NZ been bottom of the planet. . . 

New Zealand is projected to have growth of only .8% next year, compared with average growth for the 34 Asia Pacific countries of 4.4%

The IMF puts New Zealand at the bottom of the 36 countries in the Western Hemisphere, which includes North and South America and worse than all countries except Equatorial Guinea in the African outlook.

Isn’t it time our disgraced Finance Minister – who self-declared NZ’s “world-beating” Covid health outcomes would go hand-in-hand with world-beating economic outcomes – takes responsibility & resigns? Isn’t it time the Reserve Bank Governor resigns for printing $50 billion unnecessarily, causing inflation & then forcing NZ unnecessarily into recession? Will the whole sorry bunch of them keep blaming Putin & flooding for their failures? If it was all down to Putin, why is the entire world projected to outperform us in 2024? Weren’t others impacted by Ukraine similarly? Of course they weren’t. The impact of that war on NZ was less, since most of our energy is hydro & we import no food from Ukraine.

The PM doesn’t add up. The Finance Minister won’t add up. The Reserve Bank can’t add up. They’ve gone and bust an amazing country. A lot of work now needs to be done to fix it.

Well this is grim. IMF expects NZ real GDP growth to be right at the bottom of the pack. https://t.co/NmlGXDEdlp pic.twitter.com/yI8KNJw1kD

— Eric Crampton (@EricCrampton) August 27, 2023

It will take a completely different government to fix it and the fix will be neither easy nor fast.

NZ deficit worst in OECD

TheFacts has the facts – New Zealand’s current account deficit is the worst in the OECD:

Not just blow for farmers

Fonterra has reduced its forecast milk payout by a dollar per kilo :

Fonterra Co-operative Group Ltd today reduced its 2023/24 season forecast Farmgate Milk Price range from $7.25 – $8.75 per kgMS, with a midpoint of $8.00 per kgMS, to $6.25 – $7.75 per kgMS, with a midpoint of $7.00 per kgMS.

Fonterra CEO Miles Hurrell says the revised forecast Farmgate Milk Price range reflects ongoing reduced import demand for whole milk powder from Greater China.

“When we announced our opening 2023/24 season forecast Farmgate Milk Price in May, we noted it reflected an expectation that China’s import demand for whole milk powder would lift over the medium-term.

“Since then, overall Global Dairy Trade (GDT) whole milk powder prices have fallen by 12%, and China’s share of whole milk powder volumes on GDT events has tracked below average levels.

“This reflects a current surplus of fresh milk in China, resulting in elevated levels of local production of whole milk powder, and reducing near-term whole milk powder import requirements.

“The medium to long term outlook for dairy, in particular New Zealand dairy, looks positive with milk production from key exporting regions flat compared to last year,” says Mr Hurrell.

The breakeven point for many farmers is at least $8.00.

The large drop in the forecast isn’t just a blow for farmers and their staff. It’s bad news for all businesses that service and supply them, and the wider economy.

Most farmers and share milkers will have paid more provisional tax than their income will incur; less spending will mean less GST, and businesses which get a lot of their income from farmers will be getting a lot less and therefore paying less tax.

The country’s balance of payments was already in deficit and the lower payout, which is a reflection on less export income, will make that worse.

The decreased payout emphasises that Fonterra has too much milk in the Chinese bucket, as do too many of our other exporters.

The dangers of  too big a reliance on a single market were brought home when the UK entered the European Union.

We’re in a similar position with China now and need to find other markets to spread the risk.

The longer that takes, the greater the risk of future financial blows and not just to farmers.

Ugly will get uglier

Pessimism about the business outlook and the country’s direction has been confirmed:

Labour’s failure to manage the economy is translating into to more debt and bigger deficits, says National finance spokesperson Nicola Willis.

“Treasury’s ‘Interim Financial Statements of the Government of New Zealand for the eleven months ended 31 May 2023’ released today shows that the Government has underestimated how badly the economy is tanking – and now the books have blown out.

“Government debt has soared by an additional $5 billion, and the books have been plunged even further into the red, with a deficit that is $2 billion larger than forecast.

“A weaker economy will only worsen the already significant challenges facing New Zealand.

“It’s more evidence that we need an urgent change of direction. The $2 billion shortfall in company tax revenue is an indictment on the Government’s economic management.

“Businesses are drowning under a tidal wave of new costs, worsening inflation, and these are weighing the economy down.

“Labour’s only plan to get through the cost-of-living crisis was more spending and higher taxes. Now the books are blowing out and Kiwis have nothing to show for it.

“It’s time for a fresh approach. National has a plan to fix the economy, so we can afford the frontline services Kiwis deserve and get New Zealand back on track.”

Today’s updated crown accounts are ugly. They show the Government has underestimated how badly the economy is tanking. Businesses are struggling & debt is blowing out.

An urgent change of direction is needed: NZ needs a National Government to get this economy growing again.

— Nicola Willis (@NicolaWillisMP) July 4, 2023

It’s not only the Crown accounts that are ugly, those of a lot of businesses are too, especially those of farmers.

The 3.3% drop in the GlobalDairyTrade price index will do nothing to boost the mood of farmers who are expecting a tough season.

Fonterra’s opening forecast for the current season is a range of $7.25 to $8.85. The midpoint of $8 will be only just at, or more likely below, breakeven for most farmers.

The schedule for sheep and lambs is falling. It isn’t expected to get better soon and the price of wool is well below the cost of shearing.

Arable farmers, foresters and horticulturalists are also looking towards poor returns.

The usual response to a gloomy outlook like this is to forgo luxuries and be very, very careful about what’s necessary. That will feed through to reduced income for all businesses that service and supply primary producers and that will in turn hit the wider economy.

The government is blaming the bad books on the global economy and cyclones.

The cyclones have cost a lot but the government’s own shortcomings have had a far worse impact than what’s happening in the rest of the world.

Overspending borrowed money and wasteful spending  that fuelled  inflation and forced interest rates up; unsustainable increases in the minimum wage; increased compliance . . .

All of these problems are the government’s responsibility.

It won’t acknowledge that and if past performance is indicative it will have neither the will nor the ability to solve them.

Fixing the economy

National deputy leader and finance spokesperson Nicola Willis at the party’s annual conference gave her recipe for fixing the economy:

. . .When I look at this room I see friends, colleagues and supporters from so many different regions and walks of life.

I see people who’ve been working overtime to stop our health system falling over. Farmers who’ve been slogging it out to pay the bills and keep us fed.

Entrepreneurs who started a business from scratch and now employ dozens of people.

Shift workers who wake up early each morning and get home when it’s dark, saving for a home or a business of your own.

Young Nats investing in your education and your future. Superblues whose energy to keep working, keep volunteering, and keep looking after grandkids holds families and communities together.

I see new New Zealanders who left your country of birth to follow your dreams here and I see those whose ancestors bravely set out in waka from across the Pacific Ocean to discover this place we all call home.

You are people of aspiration, of grit and determination.

We are all here because we want to help forge a good future for our children, our grandchildren, and our fellow New Zealanders. 

We won’t accept a future where being aspirational means moving to Australia. 

We want a future where aspiration is rewarded here at home.

Together we share a powerful commitment to our Party values and a mission to deliver on New Zealand’s great promise.

Thank you, members, for everything you do for National and for New Zealand. 

To our Party President Sylvia Wood: thank you for your tireless efforts to renew our Party and lay the foundations for a winning campaign.

To our Party Leader and my friend Chris Luxon: You are the Leader our country needs right now. You have the intelligence, the integrity, the practical real-world experience needed to pick New Zealand up from its funk and turn it around.  To take our broken economy and struggling communities and lead them back to growth, safety, and progress.

You’ll do it in your practical, methodical, disciplined way.  You won’t stand for fluff, you’ll set high standards, you’ll demand high performance, and you’ll deliver results. You’ll do it with heart and with your inexhaustible smile. Bring on Prime Minister Luxon. . . 

This election comes at a critical time for our country.

Kiwis are struggling because the economy has been damaged.

The price of food, rents and mortgages have skyrocketed, while wages have struggled to keep up, creating a cost-of-living crisis.

Across the country families, superannuitants and workers are feeling hardship in a way they’ve never experienced before. I thank everyone who has been brave enough to share their situation with me.

Your cost-of-living stories have humbled me and made me so very determined to win this election.

If you feel anxious while you wait for the total at the supermarket checkout, if you dread the two days before pay day because there’s so little money left in your account, if you’ve had to give up on your plan to buy a home, then know this: you are not alone.

Even Kiwis who are doing everything right, who are working hard and being incredibly careful are struggling. You are struggling because the economy is failing you.

The cost-of-living crisis is dragging into its third year. Economic mismanagement has driven New Zealand into recession, even while Australia, the US, and our Asian neighbours are growing.

New Zealand’s current account – the difference between what we spend in the world and what we earn in the world – has hit a record-breaking deficit.

Interest rates have risen so fast that a ticking time bomb lies in front of us.  In the months ahead, hundreds of thousands of mortgage holders will have to move off a home loan with a 2 or 3 per cent interest rate to a loan with 6 or 7 per cent interest. Many homeowners will be left scrambling for the hundreds of extra dollars they will need to make their mortgage payments each fortnight.

When that mortgage bomb goes off, the whole economy will shudder.

The Government books are loaded-up with debt, with net debt up from under $6 billion pre pandemic to around $71 billion today.

Last time I shared these figures at a public meeting someone politely told me I must have my figures wrong. Sadly, that’s not the case. So let me say it again, New Zealand’s net debt is around $71 billion today, more than ten times what it was just four years ago, having risen around $37,000 more for every household in New Zealand.

The great shame is that there’s so little to show for this increased debt – instead we have potholes all over the roads, declining school attendance and achievement, growing health waiting lists and escalating violent crime.

Billions of dollars have been wasted on consultants, centralisation and ideological projects instead of bolstering the frontline services we need like more nurses, doctors and midwives and ensuring out kids are taught the basics.

It’s time for the excuses to stop. New Zealand needs solutions to fix our broken economy and help you get ahead once more. Most of all, what our country needs right now is hope.  That’s what National will deliver.

Other Parties might like to tell you they can fix New Zealand’s problems by robbing Peter to pay Paul. That they will drag the bottom up by tearing the top down. Or that we’ll all feel better if they punish the wealthy hard enough.

The truth is those reckless tactics would only further weaken our fragile economy, scare our best and brightest away and divide us one against the other.

As my Mum says, you won’t make your own candle burn brighter by blowing out another.

National has a better way. 

We know that only a strong economy can fix the cost-of-living crisis, lift incomes and fund the world class public services Kiwis deserve.

Our plan is about making the most of the huge advantages New Zealand has with practical, common-sense policies that will help businesses grow and help people get ahead.

Our country has so many of the raw ingredients we need for a growing, wealthy economy.

We have trade ties to the fastest-growing parts of the world, abundant natural resources and the best food producers on earth, the capacity for abundant renewable affordable electricity, oodles of entrepreneurial spirit, innovation in our blood, great employers and small businesses, smart hard-working people with such very deep hearts.

But right now, our country is not converting those ingredients into the opportunities New Zealanders deserve.

We’re being held back by wasteful government spending, high taxes and red tape that has made it far too hard to build things, invent things and grow things.

National’s job is to turn all this around.  And we will.

We will end stagflation, solve the cost-of-living crisis and get New Zealand growing again.

We will stop the wasteful spending and put the Government books back in order.

We will stop the despair and start the great repair.

Today I want to share with you the seven specific steps National will take to fix New Zealand’s economy:

1.            We will stop wasteful spending, move resources to the front line and get the books in order 

I give you this guarantee: In every Budget National delivers we will invest more in essential frontline public services including our schools, hospitals and police.  Our focus will be on driving money out of bureaucracy and into the places it is needed most.

We know that simply spending more on public services will not be enough – it’s delivering better results that really counts.

We will bring back accountability for Government spending by setting transparent targets and measuring the results we achieve for your money.

The targets we set will be for things that make a difference to you and to our country’s future:  like reducing waiting times for health services, lifting achievement in schools, and making our communities safer.

We will report against these targets every six months.

We will demand accountability from Ministers and public servants for driving the improvements and progress you expect to see.   

If they don’t deliver, they will be answerable to Chris Luxon, and most importantly they will be answerable to every New Zealander.

We will take a social investment approach to intervene earlier in people’s lives, using innovative and community-based approaches that are proven to work and that can change lives for the better. The Right Honourable Sir Bill English spent decades developing this new approach: we’ll use it to drive change for people with the most complex needs and to make progress on the most complex problems.   

2.            We will reduce the income tax you pay on the wages you earn.  

National will always be the Party of lower taxes. That’s because we trust you to spend your own money wisely and in the ways that make sense for you, your family and your own values.

We will deliver tax relief for lower- and middle-income earners by adjusting tax brackets to help compensate for inflation.

We have already set out in detail the minimum inflation adjustments we will make to tax brackets.

We will pay for these adjustments by bringing more discipline to Government spending – stopping wasteful programmes, reducing funding for some back-office functions and improving the efficiency and productivity of Government departments and agencies.

At a minimum, our tax changes will make an average wage earner $960 a year better off.  They will make someone on an income of $60,000 around $800 a year better off.

If National can responsibly offer more tax relief than that, without compromising essential public services or damaging our economy, then we will.

We will also deliver the FamilyBoost childcare tax rebate to lower the cost of childcare for families with young children.  This tax reduction will be worth up to $75 a week.

We will remove unfair taxes.  No more Ute tax.  No more Auckland Regional Fuel Tax. No agriculture in the Emissions Trading Scheme. No more App tax on your Uber or your Deliver Easy.

We will stop the tax attack on landlords and renters by restoring interest deductibility and taking the brightline test back to two years.

3.            We will cut red tape and complex regulations that are strangling our economy and making it too hard for New Zealanders to get things done.  

Here’s some examples.

We will stop compulsory and costly centralised wage bargaining and the risk it poses to thousands of small and medium sized employers and workers across NZ.  We will repeal the legislation that compels it.

We will fix the spaghetti of regulations created through the Credit Contracts and Consumer Finance Act and that have made it too difficult for people to borrow for their small business or first home.

We will fix farming regulations that defy practicality and that, according to a grower I met recently, are making it impossible for him to expand his operation to grow the affordable vegetables our country so badly needs. We will never turn our back on farmers.

We will fix the rules holding back investment in renewable electricity: it can take up to eight years for a business to get permission to build a wind farm.  That’s just crazy: we’ll set a one year limit.

We will fix the Reserve Bank Act to restore the Reserve Bank’s focus on delivering price stability by busting inflation – that means getting back down to 2 per cent and keeping it between 1 and 3 per cent over the medium term.

4.            We will grow skills and attract talent 

We will equip young New Zealanders better for their futures by doing the basics brilliantly in our schools.  An hour a day of reading, writing and maths for every primary-aged child.

We will say yes to the migrants New Zealand needs to fill acute worker shortages on our farms, in our hospitals and businesses.

We’ll train and retain more of the workers we are so short of, including bonding graduate nurses and midwives by helping pay off their student loans for the first five years of their career – provided they stay here in New Zealand.

We will reverse the Te Pūkenga disaster.

Our Welfare that Works policy will help more New Zealanders off welfare and into work by targeting better support at young unemployed people, and sanctioning those who repeatedly refuse to meet their work obligations.

Because we believe in a strong safety net for those who fall on hard times. But we also know this: those who can work, should.  

5.            We will drive technology and innovation to solve problems and create more value.

New Zealand faces major challenges in a rapidly changing world.  We must respond intelligently, making the most of new technology from other countries and coming up with breakthroughs of our own.

Climate change is here, bringing more extreme weather events and making it obvious we must reduce the emissions that are causing it.

National will embrace the science and innovation needed to do that.

New Zealand has some of the best farming science in the world: we should be the country that comes up with world-changing solutions to reduce the methane emitted by farm animals.

National will remove the ban on Gene Editing so we can get it done.

6.            We will build infrastructure for growth

A growing country needs future-ready infrastructure to keep us productive and to improve our quality of life:  more housing development, renewable power schemes, better broadband, more resilient highways, reliable public transport options and quality water services, all are essential.

National will deliver a complete revamp of the way infrastructure is delivered in New Zealand. Not by removing local democracy and centralising control: we will repeal Three Waters. Not with pretty pictures of trams down Dominion Road either.

Instead, we will work with local councils to plan and drive regional investment, by creating a fast-track consent process for getting projects built faster and using modern finance and funding tools to help pay for the big nation-building projects New Zealand needs.

7.            We will encourage trade and investment 

New Zealand’s future is global: we must be open to the world, its people, ideas, and opportunities.  National will make it easier to attract the international investment our local businesses need to grow. We will seek out a new trade agreement with India and we will drive more value from the powerful trade agreements we already have.

My fellow members, these are practical policies that will fix our economy and get New Zealand back on track. They are grounded in National Party values: encouraging effort, achievement, entrepreneurship, investment and innovation.

National understands that a strong economy is created through the efforts of every day New Zealanders choosing to work here, to create new jobs here, to start a new business, to take a product global or to create something new.

We will never take those choices for granted. Nor will we resort to the lazy politics of envy that seeks to blame our shared problems on the success of a few.

We know that success is good for the country, it’s good for the Government and it’s good for every New Zealander. 

This election the choice is clear. 

New Zealanders can vote for Parties that use tax as punishment and that seek to load more and more cost on fewer and fewer shoulders or they can vote for a National-led Government that will always strive to let you keep more of what you earn, that will value work and celebrate effort. 

You can vote for careful investment that grows stronger families and communities or you can vote for more growth of Government agencies and the red tape they create.

You can vote for policies that will push more and more of our kids to become citizens in Australia or for a National Party that will fight to ensure this is a country our kids can live their dreams in.

New Zealanders can stick with what we have today: a damaged economy that is failing its people, or you can vote National for a stronger economy that delivers for you and your family.

Faced with these choices I have faith that New Zealanders will choose a better way.  They will vote to change the direction of this country and elect a National Government that will fix our economy and put New Zealand back on track.

The choice is stark – a National-led government with Act in support or a vote for any other party that will continue to make matters worse.

They spend we pay

The IMF says New Zealand is living beyond its means :

. . . the International Monetary Fund’s (IMF) latest report on New Zealand’s economy warned the Government to rein in spending and for the Reserve Bank to prepare for further interest rate hikes, should they be needed. 

The financial agency on Wednesday said New Zealand’s economy was likely to continue slowing in the near term.

Inflation wasn’t expected to decline to the Reserve Bank’s target range of between 1 and 3 percent until 2025, the IMF warned.

It also warned New Zealand’s “current account balance (meaning the country is exporting less than importing) has deteriorated significantly, reflecting excess demand and one-off factors”. 

“For the first quarter, that [current account deficit] number came in at 8.5 percent [of GDP],” explained Mark Riggall, a portfolio manager at Milford Asset Management. “So it’s an improving situation – but it’s still pretty bad on the face of it.” . . 

A current account deficit means the country is spending more than it earns and that bad news was followed by more:

The New Zealand economy slipped into recession at the start of the year.

Stats NZ figures showed gross domestic product (GDP), the broad measure of economic growth, fell a seasonally adjusted 0.1 percent in the three months ended March.

It was the second consecutive quarter of negative economic growth, following the previous quarter’s revised fall of 0.7 percent. That meets the technical definition of a recession. . .

The ill-effects of this will be more than technical and we’ll all be paying the price  :

Red lights are flashing for the New Zealand economy, which has shrunk even while inflation rages on, National’s Finance spokesperson Nicola Willis says.

Data released by Statistics NZ confirms that New Zealand’s economy shrank in the first three months of the year, marking six months straight of declining economic performance.

“The New Zealand economy is now incredibly fragile. Excessive inflation, high interest rates, a severe balance of payments deficit and now recession: this is a dangerous combination that threatens New Zealanders’ livelihoods.

“While the Government continues to make excuses, the data does not lie: New Zealand is now in worse shape than many of the countries we compare ourselves with including Australia, Canada and the US, all of which have faced similar global challenges but none of which face the toxic economic predicament we now find ourselves in.

“The simple fact is that Labour has mismanaged the economy and New Zealanders are paying the price. Labour’s choice to spray the money hose with wild abandon with too little care for results, to so slowly re-open our borders and to ignore the pleas of productive businesses laid-low by a rolling maul of red-tape have made our predicament much worse than it needed to be.

“This recession is a red-light warning: the time for cavalier big-spending, anti-business, anti-growth policies is over.

“Now is the time for a return to the fundamentals of disciplined economic management, with a National government that backs the workers and businesses New Zealand needs to help grow our economy out of its current mess.

“National will focus on strengthening New Zealand’s economy by delivering better results for government spending, providing income tax relief for everyday workers and driving the skills, technology and infrastructure needed to support future growth.

“It is only with a strong economy that we can solve the cost of living crisis, bring down interest rates, lift incomes and pay for the quality public services New Zealanders deserve.”

Living beyond our means and a recession isn’t just numbers and dollars. It’s businesses and jobs, it’s the ability to pay for social services and infrastructure, it’s livelihoods and lives.

The government has been spending neither wisely nor well. The current account deficit, the IMF warning and the recession are the result and we will all be paying for the tough medicine that will be needed to return the country to good economic health.

Labour's economic mismanagement has seen New Zealand fall into recession.

Only National has a plan to fix the economy by stopping wasteful government spending, giving you tax relief, and delivering the skills, infrastructure and innovation New Zealand needs to thrive. pic.twitter.com/WZL0iz5AXt

— NZ National Party (@NZNationalParty) June 14, 2023

More spending + more debt = higher interest rates, longer

The Front Page interviews Christopher Luxon on the Budget:

. . . Speaking to The Front Page podcast after the big Budget reveal, National Party leader Christopher Luxon says the Budget failed to answer fundamental issues facing the country.

“I was looking for three things,” he says.

“Was there discipline in Government spending taking place? Is there some tax relief for Kiwis so they can keep more of their own money in their own pockets? And is there a plan to grow the economy? I didn’t see any answers to those three things.”

Luxon expects the decisions made in this Budget will ultimately weigh down the economy for far longer.

“When you dive into the numbers, more spending plus more debt means higher interest rates for longer, and that’s going to cause a lot of pain and suffering for everyday Kiwis.” . . .

So where does Luxon sit in this debate between a short, sharp recession and prolonging inflation for an extended period?

“You’ve got Adrian Orr pumping the brakes, taking interest rates up, and you’ve got Grant Robertson and Chris Hipkins flat to the floor on the accelerator, spending like never before. That’s the tension, and those two are out of sync. And that’s just not sustainable,” says Luxon.

The National leader’s argument is that by not getting on top of inflation now, we risk exacerbating the economic strain over time – which could lead to greater pain down the line.

“We’ve seen this happen before in the late 70s and early 80s. When you have high levels of embedded inflation, you end up with high levels of interest rates staying higher for longer – which is what Treasury said [last week]. Then you end up with a slowdown in the economy and you either have anaemic growth, slow growth or no growth, which leads to a minor recession or a big recession.”

If a recession does happen off the back of a prolonged period of inflation, this has the potential to hurt families.

“When people start losing their jobs and they’ve got high inflation with high food prices and rents, and high-interest rates and mortgage repayments, you end up with a different level of pain. And that’s really been my frustration since taking on the leadership role. There are some amber lights on the economic dashboard at the moment.” . .

More often than not, politicians seem more concerned about who’s getting credit for an idea than whether it gets executed.

“I’m less hung up on that,” counters Luxon. “As an outsider coming in, it’s all just about outcomes.”

He argues that partisan politics consistently stands in the way of progress.

“You see it in New Zealand all the time. We had a series of roads that we were supporting investment and infrastructure in. I’m talking about the Waikato Expressway and the extensions around that. Then a new Government comes in and turns those off, then they get turned on again, off again and on again.

“Kennedy said ‘Let’s go to the Moon’ and people landed on the [surface] in nine and half years. So why does it take us longer than that to build a central interceptor in Auckland? Or why has it taken 24 years to build an Eastern busway that’s just six and a half kilometres?”

He goes a step further, saying he would be willing to work with Labour to get key projects across the line regardless of who is in Government so that such decisions are not vulnerable to the whims of politicians every three to six years.

“What infrastructure will make the biggest amount of difference to the most people in the fastest amount of time? And let’s lock and load on what those three to five critical projects are for each region. Let’s agree on how we’re going to fund it between central and local government. Let’s lock it in and get on with it because getting things done is critical.” . . .

You can listen here.

Making worst worse

First the good news: Fonterra has reported a 50% increase in its half-year profit:

Fonterra Co-operative Group Ltd today released its 2023 Interim Results which show the Co-op has delivered a half year Profit After Tax of $546 million, an earnings per share of 33 cents, and a decision to pay an interim dividend of 10 cents per share alongside a forecast Farmgate Milk Price range of $8.20 – $8.80 per kgMS.

The Co-op also upgraded its full year forecast normalised earnings from 50-70 cents per share to 55-75 cents per share and announced a proposed tax free capital return to farmer owners and unit holders of around 50 cents per share, subject to completion of the sale of its Chilean Soprole business.  . .

Now for the bad news.

In spite of the good result for our biggest company, the country recorded its worst current account deficit yet:

The annual current account deficit was $33.8 billion (8.9 percent of gross domestic product (GDP)) in the year ended 31 December 2022. This was $12.7 billion wider than in the year ended 31 December 2021 (6.0 percent of GDP), according to figures released by Stats NZ today.

This is the largest annual current account deficit to GDP ratio since the series began in March 1988. The largest prior to the COVID pandemic was 7.8 percent of GDP in December 2008, during the global financial crisis.

A current account deficit reflects that we are spending more than we are earning overseas. The size of the current account balance in relation to GDP shows its significance in the context of New Zealand’s overall economy.

The widening in the annual current account deficit was mainly due to a $10.0 billion widening of goods and services deficit and $2.7 billion widening of the income deficit. . .

This will almost certainly get worse as a result of Cyclone Gabrielle’s destruction of export crops.

And there’s more bad news:

Gross domestic product (GDP) fell 0.6 percent in the December 2022 quarter, following a 1.7 percent rise in the September 2022 quarter, according to quarterly figures released by Stats NZ today.  . . .

National’s Finance spokesperson, Nicola Willis,  says the deepening cracks in the economy are putting more people at risk of financial distress:

. . . “This result is worse than many had anticipated, with the Reserve Bank having forecast 0.7 per cent growth for the period,” Ms Willis said.

“Excluding Covid-19 lockdowns, it is the weakest quarterly growth since the Global Financial Crisis.

“A stalling economy is yet more bad news for New Zealanders already battling sky-high inflation and rapidly rising interest rates.

“Under Labour, the economy is in trouble and New Zealanders are paying the price. Workers are already suffering from badly-stretched after-tax incomes and a weakening economy means things will get worse.

“We also learnt this week that New Zealand now has its largest current account deficit since records began, meaning we are collectively living beyond our means.

“Taken together, the outlook for the New Zealand economy looks increasingly worrying: the cost of living crisis is dragging on even while interest rates climb, debts grow and businesses stall. . . 

“Today’s data confirms once again how badly our economy is travelling under Labour. The key question now is how much worse things will get.”

The worst current account gap since records began and a worse than expected GDP is a bad combination for us all.

There’s nothing to give us confidence the government has a plan that will make matters better and far too much evidence of policies that will make them worse.

Continuing to waste money on Three Waters, Auckland’s light rail project and  plans for pumped hydro at Lake Onslow in spite of a 300% increase in costs to $16 billion are just three examples of how the government will make the worst economic records yet even worse.

 

High interest rates good for savers?

Are high interest rates really good for savers?

. . . [Reserve Bank Governor Adrain Orr] diplomatically suggested if the government were minded to do some “reprioritisation” of spending (in other words, to make cuts to redistribute funds to cyclone relief) or jack up taxes to help pay for it, that would make his life easier.

That presents significant challenges for both of the major political parties, because Orr’s point is that more government borrowing and spending simply works against getting inflation under control.

More borrowing and spending fueling inflation is a point the Opposition has been making for some time.

He was also at pains to stress higher interest rates were good for savers. . . .

Are they really?

Higher interest rates provide more income from savings but when inflation is eating into the real value of the money invested, savers will still be going backwards.

Abuse of process

The continued reduction in the fuel tax will cost about  $718m . Kate MacNamara found out where the government is getting that money:

. . . Finance Minister Grant Robertson has said that the $718m was found in the Government’s ordinary course October Baseline Update, an exercise that includes identifying underspends and reallocating the funds (the Government can also cancel the funding and to that degree reduce the country’s projected debt and the extent of deficit spending).

Some of these underspends come from Covid-19 policies, Robertson confirmed, though he declined to indicate the proportion.  . . 

But leftover Covid money, originally allocated through the extraordinary Covid Response and Recovery Fund – created in 2020 to respond to the pandemic, and topped up in 2021 and early 2022 – has paid for all of the $1.3b cost of the fuel tax reduction and associated measures to date.

That giant $61.6b pot of money was officially closed on April 11, 2022, and the decision was taken to manage the cost of Covid through the standard Budget process, but underspends from the fund persist (The Herald covered a further $2.05b repurposed from the CRRF after its closure for general Government priorities here, and Robertson’s rejoinder here).

Though the emergency is over, this leftover funding has a long tail, and, what’s more, it’s beginning to look like the Minister of Finance has one too: a big, bushy one.

This is borrowed money. A prudent government, genuinely wanting to reduce inflation would not reallocate it.

Remaining from now-defunct Covid policies, and squirrelled away, are a series of fat underspends: Managed Isolation and Quarantine ($1b), the Small Business Cashflow Scheme expenditure ($425m), and Covid-19 Support Payments expenditure ($227m), as well as a further $23.56m, which The Treasury said last July was the total of combined underspends from across Education, Internal Affairs, Conservation, Agriculture, Biosecurity, Fisheries and Food Safety.

Like so many stashed nuts, these pots of money were all tapped (though in their total not exhausted) to fund the initial $350m for the first round of the fuel tax programme (March to June 2022), the $235m cost of the second round (June to August), and the $658m for the third round (August to January 2023). Incidentally, late last year that January end date was pushed out to March 31st, at which time, it was promised, the cuts would definitely be cancelled.

But then Prime Minister Jacinda Ardern resigned, Hipkins rode in on the “bread and butter” wagon to ready for an October election, and he told Robertson that more nuts were needed.

Former deputy chief economic adviser to The Treasury, Tony Burton, has called the Government’s ongoing use of the funds set aside as an emergency contingency an “abuse of process” as it is laid out in the Public Finance Act (early last year The Treasury made it clear that the fuel tax reductions did not meet the criteria of the CRRF).

“The flexibility of having a contingency is balanced by being clear about the scope of the emergency the contingency is there to deal with. It is an abuse of process to use the contingency for purposes outside the scope,” Burton said, noting that it made no difference whether the fund was closed or not.

“A household analogy would be if the bank agreed you could have an overdraft to cover the uncertain costs of repairing a roof damaged in a storm. If you found the roof cost less than the overdraft and you told the bank they had to let you use the money to fund a holiday, they would undoubtedly object [that] this was not what was agreed! Of course, [the] Government owns its own bank, so all the rules can do is force the Government to reveal when it has breached trust in this way,” Burton said.

It’s certainly been convenient for the Government to have the spare funds sloshing around. Though the fuel tax reductions policy was instituted in March 2022, before the Budget, none of the roughly $1.3m of spending to date was managed within this year’s Budget allowance. 

The accusation of an abuse of process and breach of trust is a serious one.

And while it is convenient for the government to have this money sloshing around, it is reckless of it to spend it on continued cuts to fuel taxes.

These cuts help the wealthy the most and provide least help to the poor who are most in need.

They also expose the hypocrisy in the government’s claims to be serious about climate change.

That it is abusing the process to fund this policy makes it even worse and it is unlikely to stop here.

And it’s worth remembering that if the Government had retired the unspent CRRF funds (returned them “to the centre” as The Treasury puts it) and factored this into the net debt calculation accordingly, then if it wanted to increase new spending by an equivalent amount, Robertson would have had to increase the Budget allowance or find the savings elsewhere.

Increasing the Budget allowance, which was then already set at $6b, would have invited the accusation that the Government couldn’t control spending. Actually making the necessary trade-offs and finding savings elsewhere would have required him to rein in spending.

Such fiscal discipline is now doubly unlikely as the Government looks ahead to a long electoral winter of defensive action. Its best hope is to scamper about raiding every cache of metaphorical nuts it ever hoarded and to shower them on voters.

The government keeps telling us its concerned about inflation and serious the cost of living crisis.

But its actions belie its words and show that it really has no intention of tightening its own belt.

Instead it will continue to prove that it really is, as National keeps saying, addicted to spending.