Latest / Best of Business / Nicola Willis: Finance Minister on the Government's financial update revealing surplus won't return until 2030

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Nicola Willis: Finance Minister on the Government's financial update revealing surplus won't return until 2030 · Best of Business

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  Speaker 1: You're listening to a podcast from newstalk s'b follow this
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  Speaker 2: Of New Zealand's financial troubles confirmed today and things look
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  Speaker 2: even worse than we fared. There's no surplus in sight
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  Speaker 2: and the books will stay in the read until at
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  Speaker 2: least twenty twenty nine, and that's only thanks for a
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  Speaker 2: bit of accounting trickery that will see ACC's deficit removed
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  Speaker 2: from the books. The Finance Minister, Nicola Willis is with
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  Speaker 2: me on the show. Minister, thank you very much for
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  Speaker 2: your time. On a scale of one to ten, where
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  Speaker 2: do you put this? How bad do you put this?
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  Speaker 3: Ah? Well, look, this is a tough set of books,
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  Speaker 3: there's no question about it. We've seen a downgrade in
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  Speaker 3: the forecast assumptions that Treasury were making prior to the election.
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  Speaker 3: They were essentially too optimistic before the election and that
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  Speaker 3: has an impact both on the growth rate we're expecting,
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  Speaker 3: the revenue we're going to receive, and our path back
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  Speaker 3: to getting the books back in balance. But we remain
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  Speaker 3: resolute what we need to do now is keep that
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  Speaker 3: fiscal suppline, that careful spending going and really drive growth
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  Speaker 3: across the economy. And the good news is that's what
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  Speaker 3: we're doing. And there is a forecast recovery to sustained
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  Speaker 3: growth next year and that's exactly what New Zealand needs.
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  Speaker 2: Yeah, but on a per capita basis, it's down point
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  Speaker 2: six percent next year, it's hardly thrived till twenty five.
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  Speaker 3: Look, we've inherited a very tough set of economic conditions
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  Speaker 3: and as we look ahead, we are seeing the scars
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  Speaker 3: that were left by the huge spending policies of the
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  Speaker 3: last government and the wake of COVID. They set us
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  Speaker 3: on a path that was not sustainable. We've now got
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  Speaker 3: the tough job of cleaning it up and we're going
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  Speaker 3: to get on and do exactly that. The good news
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  Speaker 3: is New Zealanders have elected a government that's up to
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  Speaker 3: this task.
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  Speaker 2: You're spending less than they were, but you're still spending more.
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  Speaker 2: You're still borrowing more and not cutting as much. In
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  Speaker 2: other words, we're still having You know, our borrowing is
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  Speaker 2: going to go up sixteen percent, Our government debt is
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  Speaker 2: going to go up sixteen percent at assuing of bonds.
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  Speaker 2: Because of this, it's four times more than the economist's thought.
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  Speaker 3: The important sportant thing there is that is not the
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  Speaker 3: result of any fiscal or policy decisions the government's taken.
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  Speaker 3: That is the result of adjustments and the Treasury's forecast
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  Speaker 3: assumptions about long run productivity and the size of the
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  Speaker 3: recession we've been in. So what we're doing is controlling what.
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  Speaker 2: We But you haven't responded with fiscal policy changes.
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  Speaker 3: We have responded strongly to the fiscal situation at budget
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  Speaker 3: time by reducing our notting allowances this time.
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  Speaker 2: Why haven't you, Given the books have deteriorated so much
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  Speaker 2: between budget and now, have you not changed your fiscals now?
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  Speaker 3: Well, I've always said that I'm not going to overreact
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  Speaker 3: to changes in the forecasts up or down, and that
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  Speaker 3: we are deliberately taking a medium turn sustainable approach to
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  Speaker 3: fiscal consolidation. You're right, there is an alternative with more
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  Speaker 3: aggressive short term measures like a big increase in tax
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  Speaker 3: or big slashing to spending, And the judgment we've made
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  Speaker 3: is actually that would come at a cost both to
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  Speaker 3: the economy and its recovery, also to New Zealanders. So
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  Speaker 3: ours is a balanced course that we're charting. It's still
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  Speaker 3: going to be challenging, It's still going to involve significant
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  Speaker 3: trade offs. In order to put the extra spending into health,
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  Speaker 3: into education, into the police, into areas that really need it.
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  Speaker 3: We're going to have to reprioritize lower value spending from
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  Speaker 3: other parts of government and really keep a lid on
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  Speaker 3: that in a way that hasn't been the case in
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  Speaker 3: recent years. So you are going to see a much
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  Speaker 3: more fiscally disciplined approach from.
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  Speaker 2: US Taxpayers Union says. The fact is, despite the government
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  Speaker 2: being elected on a platform of cutting spending, Nicola Willis
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  Speaker 2: continues to spend even more than Grant Robertson and kick
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  Speaker 2: the fiscal can down the road.
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  Speaker 3: Well, I would just put my operating allowances up against
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  Speaker 3: his any day of the week. They are the lowest
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  Speaker 3: they've been since twenty seventeen. That's our discretionary spending. The
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  Speaker 3: last budget, we delivered twenty three billion dollars worth of savings,
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  Speaker 3: and we did that with just a few months to
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  Speaker 3: find them. We've now had a year. We're going to
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  Speaker 3: find more savings, and it's important that we do because
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  Speaker 3: everyone needs to remember that the money doesn't come from
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  Speaker 3: a magic tree at the bottom of the garden. It
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  Speaker 3: comes from new Zealander's pockets. And we're a government that
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  Speaker 3: wants to make sure that we keep the finances in
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  Speaker 3: good order, but we do it by being disciplined about
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  Speaker 3: our own spending.
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  Speaker 2: Excluding the ACC deficit from your books makes them look better.
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  Speaker 2: But is it the right thing to do? Treasury says no.
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  Speaker 3: Well, actually, there's been an independent economist who's just come out.
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  Speaker 3: He's from B and Z and he makes the point
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  Speaker 3: that ACC is a self funded crown entity and that
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  Speaker 3: fiscal policy should not be adjusted to compensate for what
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  Speaker 3: should be a long run thing. And he agrees with
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  Speaker 3: that stance. So it's not just me who thinks this
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  Speaker 3: is sensible. This is about saying, look, ACC is a
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  Speaker 3: long run insurance scheme. It needs to fund itself over
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  Speaker 3: the long term. It's inappropriate to make immediate changes to
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  Speaker 3: our fiscal policy in the next four years to compensate
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  Speaker 3: for a deficit or surplus in any one year.
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  Speaker 2: Are there other government agencies in similar positions that you
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  Speaker 2: could look to pick off and take out and improve
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  Speaker 2: the look of the book.
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  Speaker 3: We're not going to do that. This was the result
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  Speaker 3: of a review. No, we're happy with our The Garalex
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  Speaker 3: measure that's going to be what we're going to target.
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  Speaker 3: We're targeting a surplus in twenty seven twenty eight financial
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  Speaker 3: year by this measure. We think that's the appropriate way
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  Speaker 3: to measure the government's spending balance.
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  Speaker 2: Minister, when will people feel like? When are we going
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  Speaker 2: to feel like we're actually getting somewhere as a country
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  Speaker 2: because we haven't felt like that in a very long time.
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  Speaker 2: And next year we're looking at and we're not even
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  Speaker 2: looking at growth on a per capita next year. It's
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  Speaker 2: not until the year after that we get to experience
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  Speaker 2: that again, that feeling.
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  Speaker 3: Yeah, I totally get what you're saying. New Zealand has
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  Speaker 3: been through an incredibly tough time. But what we know
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  Speaker 3: now is that for the first time in a long while,
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  Speaker 3: we're now forecasting a consolidated period of growth, a sustained
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  Speaker 3: period from growth, and that upturn has been a long
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  Speaker 3: time coming, but it is now happening. And that means
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  Speaker 3: that businesses and households are expected to be investing and
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  Speaker 3: bending more, that we are expecting the economy to be
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  Speaker 3: growing now. I want to drive that harder. I'm not
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  Speaker 3: happy with just saying, oh, well, there's going to be
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  Speaker 3: a cyclical return. That's why the government's driving our agenda
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  Speaker 3: of doing things like fast track legislation to get development
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  Speaker 3: and progress underway. That's why we're fixing the basics in
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  Speaker 3: our schools. It's why we are taking new approaches to
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  Speaker 3: infrastructure investment, getting sensible about overseas investment, because all of
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  Speaker 3: those things cumulatively improve the productive capacity of our economy
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  Speaker 3: and that's actually where more income comes from. That's where
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  Speaker 3: more opportunities come from.
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  Speaker 2: Minister, thank you very much for your time. That is
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  Speaker 2: the Finance Minister Nicola Willis on the HAIFU results that
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  Speaker 2: have come out today in the budget policy statement.
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