One Question Quiz
Bernard Hickey on the budget (Image: Tina Tiller)
Bernard Hickey on the budget (Image: Tina Tiller)

PoliticsMay 30, 2024

Bernard Hickey on the budget: ‘They’ve talked their way into a deeper recession’

Bernard Hickey on the budget (Image: Tina Tiller)
Bernard Hickey on the budget (Image: Tina Tiller)

A special Gone By Lunchtime meets When the Facts Change crossover episode for budget day.

Nicola Willis has kept her word: in her first budget, the National-led coalition has delivered tax cuts. As for whether she is right to say that those cuts are delivered thanks to savings and new revenue, and not from borrowing, it’s really a “semantic question”, according to Bernard Hickey. Combined with in-work tax credits and $730 million for residential rental property investors, “overall when you look at it, we’re talking about about $3.5bn a year extra going out to taxpayers, which over the four years, we’re talking over $12 billion, which magically, is actually the exact increase in the borrowing”, he said.

Speaking with Toby Manhire for a special crossover episode of Spinoff podcasts Gone By Lunchtime and When the Facts Change, Hickey said: “Because what has actually happened here, the big picture from 40,000 feet, is that the economy has slowed more than the government expected. So it’s got less money coming into the coffers, particularly in corporate tax revenues, and also lower GST and income taxes than would otherwise be the case.”

Since National made its tax pledge, the economy had soured. “The net effect of all of this economic slowdown since the election, is that the government’s still going to have to borrow an extra $12 billion,” said Hickey. “Now, their argument from the start was these are going to be tax cuts that will not be funded by borrowing.” But in Hickey’s view: “These are tax cuts funded by borrowing. And that’s because the economy’s worse than expected.”

Willis laid the blame for the grey economic clouds at the feet of her Labour predecessor. “We are welcoming in a new era of careful government spending, lower taxes for hard-working New Zealanders, and a strong focus on rebuilding the economy,” she said. “This year’s budget is the clean-up job New Zealand needs after six years of economic mismanagement.”

The new government couldn’t, however, escape all responsibility, said Hickey. “For example, for the construction sector, we got new business confidence figures out yesterday showing another slump in confidence from the construction sector. Just last month, the big four in the construction sector, infrastructure house building, wrote a desperate letter to Chris Bishop to say: please restart these projects that you had in your pipelines give us some, some work to do. It’s not like we we don’t have work to do with building lots of things.”

By halting three waters, repealing RMA work, and “shutting down a lot of transport projects, including Let’s Get Wellington Moving and Auckland light rail, along with big uncertainties about funding coming from the government councils, it has essentially created a vacuum, said Hickey. “The whole economy, around construction in particular, is in a state of suspended animation”, said Hickey.

“And that along with a lot of noise about how the government is going to tighten its belt and cut spending and cut jobs, about 5,000 so far, in the public sector, has shocked confidence in the economy in a way that even I think the government is surprised that they have talked their way into a deeper recession.”

Keep going!