Economists are warning that the Labour-led government’d Debt will be billions more than planned.
. . . In Opposition Labour laid out a fiscal plan which would borrow around $11 billion more than National had proposed, but still cut debt as a share of the total economic output from 24 per cent to 20 per cent by 2022.
The plan formed a major point of contention during the election campaign, as National finance spokesman Steven Joyce was widely mocked for his claim that Robertson’s plan had a major “fiscal hole”.
This is a very good argument for independent costing of party policies before an election.
But bank economists, who monitor the likely issuance of government bonds, are warning of pressure for Treasury to borrow billions more than Labour had signalled because of new spending promises.
ANZ has forecast that Labour will borrow $13 billion more than Treasury’s pre-election fiscal update maintained the former Government would over the next four years, although around $3b of that would go to the NZ Super Fund.
Borrowing to contribute to the super fund is as reckless as borrowing to play the share market instead of paying off a mortgage.
This would see net Crown debt at 23 per cent of gross domestic product, 3 percentage points higher than Labour’s plan.
Outgoing ANZ chief economist Cameron Bagrie said the estimates for new spending were “conservative”, including an assumption that the new $1b a year regional development fund would come entirely from existing budgets. . .
BNZ senior economist Craig Ebert said the figures were hard to determine so early in the term, but borrowing “could amount to a number of billion dollars” more than Labour had outlined. . .
During question time in Parliament on Tuesday, Robertson maintained that the Government was sticking to its pre-election debt plan.
“But what we’re not prepared to put up with is a situation where we do not have enough affordable homes, where we have not made contributions to the [NZ] Super Fund, and where an enormous social deficit is growing,” Robertson said.
“In those circumstances a slower debt repayment track is totally appropriate.”
A much more disciplined approach to spending would be wiser.
National took office when the kitty was empty and Treasury was forecasting a decade of deficits.
In spite of the GFC and natural and financial disasters, it returned the books to surplus without a slash and burn approach to social spending.
This government has taken over with plenty of money in the kitty and forecasts of continuing surpluses.
With careful management, it should be able to
Labour and many on the left talk about the “failed policies of the 80s”.
They never look at the cause of the problems which precipitated those radical policies – higher spending, higher taxes and higher borrowing.
Those were the failed policies.
Unless the new government takes a much more careful approach, it will take path New Zealand down that path again.