Latest / Best of Business / Brad Olsen: Infometrics Principal Economist on Treasury's latest warning to the Government

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Brad Olsen: Infometrics Principal Economist on Treasury's latest warning to the Government · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talks B Follow
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• 0:17
  Speaker 2: Ryan Bridge, Treasury and Wellington has warned the government might
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  Speaker 2: have to reduce public services if it wants to stick
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  Speaker 2: to its spending plans. It's also forecasting that we won't
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  Speaker 2: get back to surplus until twenty thirty one. The Finance Minister,
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  Speaker 2: Nichola Willis decided not to publish Treasury's longer range forecasts
• 0:34
  Speaker 2: in December, saying the projections were highly uncertain infa metric's principle.
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  Speaker 2: Economist Brad Olson is with me, Hey, Brad, good evening.
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  Speaker 2: Are they highly uncertain?
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  Speaker 3: Oh, the projections are always highly uncertain, But I don't
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  Speaker 3: think it's a reason not to publish them. With the
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  Speaker 3: fiscal strategy model, I mean that is important for us
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  Speaker 3: thinking about where things go next. The Government of the
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  Speaker 3: day never sets out policy for the next fifteen years,
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  Speaker 3: or if they do, they can't realistically believe that they
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  Speaker 3: will actually achieve that for the next fifteen years. Everything
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  Speaker 3: is sort of up for grabs over that sort of
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  Speaker 3: period of time. It's a little bit frustrating that the
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  Speaker 3: Government of the day didn't want to publish those figures
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  Speaker 3: because we do use those as forecasters as models to
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  Speaker 3: try and understand a bit where things are going. But
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  Speaker 3: suffice to say the Treasury has highlighted in there that
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  Speaker 3: it's very difficult on the current settings to have effectively
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  Speaker 3: the same size of government but also with the sort
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  Speaker 3: of levels of spending that the government wants to make,
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  Speaker 3: and that is the difficult challenge the government has is
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  Speaker 3: that on current settings we're spending a lot more than
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  Speaker 3: the government is earning. That means we're in deficit. That
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  Speaker 3: deficit will last for longer. And you can either grow
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  Speaker 3: your revenue or you can cut your expenses, and there's
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  Speaker 3: no really other two ways around it.
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  Speaker 2: And the problem with cutting you with cutting your revenue
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  Speaker 2: ie tax cuts. And we had Nicola Willis on the
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  Speaker 2: show last night talking about the potential potential for corporate
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  Speaker 2: tax cuts or for faster depreciation on manufacturing technology, which
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  Speaker 2: I think is something that I really think is something
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  Speaker 2: they'll look at. That stuff costs money in the short term,
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  Speaker 2: but it takes a while to pay on oft in
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  Speaker 2: terms of growing the pine, isn't it?
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  Speaker 1: It does?
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  Speaker 3: And it also I mean it's locked in. It's not
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  Speaker 3: like it's just a one year change, you know, if
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  Speaker 3: you change corporate tax settings or depreciation or similar, that's
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  Speaker 3: a long term, each and every year thing. It's also
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  Speaker 3: clear though that the government does need to consider some
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  Speaker 3: of those I mean, you look as well at the
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  Speaker 3: likes of investing Z and trying to get more investment
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  Speaker 3: into the country from overseas. Definitely an area that I'd support,
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  Speaker 3: you know, economically that's critical, but it's harder to sell
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  Speaker 3: to overseas when we have a corporate tax rate at
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  Speaker 3: a higher level than many other jurisdictions globally. You know,
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  Speaker 3: people will focus a little bit more on what sort
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  Speaker 3: of text they have to pay on the profits that
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  Speaker 3: they make. But like you've highlighted that, if you change
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  Speaker 3: too much on the revenue side, you make what is
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  Speaker 3: already a very difficult sort of set of circumstances even
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  Speaker 3: more challenging. And so for the government, you know, they're
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  Speaker 3: having to think about not only the sort of size
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  Speaker 3: of investments that they are making in the short term
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  Speaker 3: and that the size of you know, budget surpluses are
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  Speaker 3: budget allowances rather, but also longer term. Treasury highlighted that
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  Speaker 3: the current large levels of infrastructure investment that we need
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  Speaker 3: to make as a country, which I'm pretty sure everyone
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  Speaker 3: is broadly on board with. They say, given how high
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  Speaker 3: those are, the operating cost of having so much additional
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  Speaker 3: new infrastructure is going to cost us big in the
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  Speaker 3: long term as well. So we really are now facing
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  Speaker 3: some pretty thorny economic and fiscal issues.
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  Speaker 2: How you're about to go to Jane Jones's party, I
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  Speaker 2: hear have fun.
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  Speaker 3: Indeed, thank you very much.
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  Speaker 2: That is brad Olsen. It's coming to us from the
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  Speaker 2: winterless North.
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