RICHARD PREBBLE: Politicians are in fantasyland

My nephew can earn 50% more in Australia. To earn that pay here, he must get further qualified.  

My advice was, “get the qualification”.

Last week, I wondered if I was right.

Nicola Willis gave a speech, “Budget 2025: The Growth Budget”.

There was almost nothing about growth. The speech aimed to set out the economic realities. The speech demonstrated that the finance minister is in a fantasyland.

The minister said:

“Government debt leapt up by almost $120 billion between 2019 and 2024…That amounts to $22,000 more in debt for every New Zealander.”

“New Zealand’s net core Crown debt, which once hovered between five and 25 per cent of GDP, rose to around 42 per cent last year.”

“The interest bill on government debt has soared from $3.6 billion in 2014 to $8.9 billion last year. That sum is more than annual core Crown expenses for the Police, Corrections, the Ministry of Justice, Customs and the Defence Force combined”.

“That level of borrowing obviously can’t go on forever.”

Nicola Willis’ proposed solution?

“Our government’s strategy is to reduce the deficit over time, through a gradual programme of consolidation and careful spending choices” to achieve “a small surplus in 2029”.

We have seen this movie before.

The Labour government in 2022 projected a surplus by 2024/25.

Blaming cyclone Gabrielle, this was revised to 2025/26.

In the election campaign National projected a surplus by 2026/27.

In last year’s budget it was revised to 2027/28

Now the surplus is promised in 2029.

The minister is continuing with all of Labour’s agencies. The promised billions in savings must be one off. 

The surpluses are never achieved because bad things happen.

Covid, cyclones and now Trump.

Trump has caused the treasury to lower its forecast for growth this and next year.

It is the facts that were omitted from the speech that are of the greatest concern.

Spending, the deficit and borrowing have all increased. It is less than what Labour was planning but it is a significant increase.

The government is too large.  

There is economic research, some of it done in New Zealand, that the size of government affects economic growth.

Historically National has pledged to keep government spending at less than 30% of GDP.  Spending is over 10% higher at 33.9%.

The Treasury is issuing dire warnings.

People who live next to a railway station say they do not hear the trains. The Treasury is next to the Beehive. Perhaps that is why politicians do not hear the Treasury alarms.

The Treasury warns that demographic change will upend the government’s accounts.

Nicola Willis only projects to 2029 because 2030 is the tipping point after which demographics will cause deficit blowouts.

By 2030, the number of people aged eighty will rise by 40%, while those aged ninety will double. Health stories dominate the TV news because our older population requires more hospital care.

As the pre-budget speech omits addressing the most serious issues the budget will also.

We need comprehensive super and health reform. Savings based super and health as they have in Singapore.

It is easier to buy helicopters than undertake reform.

The reforms should have started thirty years ago but that is no reason not to start now.

The Treasury advocates lifting the age of super. Some people are worn out by 65. I know a fireman and a mechanic whose backs are so bad they can no longer work.

A surcharge on super is the best immediate solution. Long term, it is making Kiwi Saver compulsory. 

Health system accounts would encourage more personal responsibility.

The reaction of the other parties revealed the Opposition are also in a fantasyland. No acknowledgement of the coming crisis.

Chis Hipkins blamed last year’s tax cuts. The cost-of-living crisis and recession that Labour created would have been worse without tax relief.

Labour’s tax on landlords drove up rents. Today it’s a renters’ market.

Given the fall in the share market, this year a capital gains tax would raise no revenue.

When James Shaw retired the Greens gave up any pretense of economic credibility.

The Greens proposed work schemes for 41,000. Why stop at 41,000? There are over 200,000 on the Jobseeker benefit.

If make-work schemes made countries prosperous then the communists would have won the cold war.

Te Pati Maori’s proposal was that Maori should get super at age 55. Should David Seymour, because he has a Maori ancestor, get super earlier?

David Seymour did make last week’s only good proposal to reduce ministerial portfolios from 82 to 40 and ministers from 28 to 20. 

I am left wondering if I should tell my nephew to take the job in Australia.  

The Honourable Richard Prebble CBE is a former member of the New Zealand Parliament. Initially a member of the Labour Party, he joined the newly formed ACT New Zealand party under Roger Douglas in 1996, becoming its leader from 1996 to 2004.

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