The government will welcome the unexpectedly large surplus, but it brings with it a heap of extra pressure from all sides, writes RNZ political editor Jane Patterson
It’s the political curse of finance ministers past – deliver a bumper surplus and immediately come under pressure to spend up large.
As Grant Robertson stood and delivered the latest financial results the ghost of his Labour predecessor Michael Cullen loomed, both holding on tight to the extra billions in case of the inevitable “rainy day”.
Cullen – who of course is still very much alive – became the target of an effective National Party campaign in the mid 2000s, spearheaded by then finance spokesperson John Key, agitating for tax cuts as the surpluses under Labour became ever larger.
As history has shown, Cullen’s parsimonious approach cushioned New Zealand against the worst ravages of the global financial crisis and meant the incoming National government inherited an economy in 2008 with comparably low public debt.
In turn Grant Robertson has benefited from Bill English’s financial management through some tough years under National.
The latest report on the books shows a $5.5 billion surplus, higher than was forecast at the May Budget, prompting immediate calls for Robertson to open up the purse strings.
A word of caution from Treasury though is that due to timing there is spending, yet to kick in, that will reduce the size of the surplus. Regardless, there are ballooning surpluses forecast for future years.
As well as the government’s own substantial spending programme there some big bills down the line: pay claims in education and health and biosecurity incursions including Mycoplasma bovis – to name just a few. Also flagged is what’s likely to be a significant payout to former and present public servants as officials work through problems with the Holidays Act to compensate people who’ve been underpaid over a number of years.
A grey cloud on the horizon is the massive, impending cost of the baby boomer retirement, a warning sounded in every financial update.
Robertson’s immediate challenge, though, is managing the expectations of social and public sectors that had high hopes of money flowing much more freely out of a Labour-led government, sectors left largely disappointed by the May Budget.
Even Labour’s support partner the Greens have joined that chorus, urging the government to spend more now to alleviate the housing crisis and homelessness.
The immediate reaction from National’s Simon Bridges was to demand the government reinstate National’s plan for broad tax cuts. The coalition opted instead for the more targeted Families Package, but Bridges argues with more than $5bn up its sleeve it can afford both.
The other point Bridges makes is while the government sits on its pile of cash it’s also busy leveraging even more tax out of New Zealanders through fuel levies.
Commodity prices and the weakening New Zealand dollar have helped to push prices up at the pump but a large portion still goes directly to the government.
All governments regularly increase the fuel excise, but Labour has piled on extra levies including an extra 3.5 cents a litre that came into effect across the country in September (with two more due in the next two years), as well as 10 cents a litre for Auckland motorists in the form of a regional fuel tax.
The money raised will go towards improving transport networks but the government still has to own the fact it’s imposing greater costs on New Zealanders, months after Labour made inequality and the cost of living a key part of its election campaign.
The timing for the excise increases and the regional fuel tax could not have been worse with prices already hitting record highs, but the government should own the fact it’s part of the problem, and has the more immediate ability to do something about it, alongside its plan to investigate the industry – a plan that will have no tangible impact until well into next year.
Originally published at RNZ
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