Latest / Best of Business / Jenee Tibshraeny: NZ Herald Wellington business editor on the IMF warning the Government will need to hike taxes and cut spending

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Jenee Tibshraeny: NZ Herald Wellington business editor on the IMF warning the Government will need to hike taxes and cut spending · Best of Business

• 0:09
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  Speaker 2: So as I was telling you earlier, the IMF, the
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  Speaker 2: International Monetary Funders, given the government it's annual report card
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  Speaker 2: on the economy. It says the government will need to
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  Speaker 2: raise taxes and cut superannuation spending to get finances on
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  Speaker 2: a more sustainable path. The Herald's Wellington Business editor Jene
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  Speaker 2: tib Chrainey is across the story and with us hygienate
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  Speaker 2: Hi Heather. What did they say about Kiwi Saver.
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  Speaker 3: Well, they want to see us lift our contribution rates
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  Speaker 3: and also have more people participate in the scheme. So
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  Speaker 3: the IMF didn't go so fast to say that membership
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  Speaker 3: and KEIW savers should be compulsory, which is what National
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  Speaker 3: and New Zealand First are campaigning on. But they believe effectively,
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  Speaker 3: we need to all help ourselves prepare for retirement because
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  Speaker 3: you know that the cost of super is rising, is
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  Speaker 3: the population ages. You know that's the super government pays
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  Speaker 3: people who are retired. So it actually thinks basically we
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  Speaker 3: need to do more to help ourselves.
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  Speaker 2: Okay, they say that everything you would expect them to say, right,
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  Speaker 2: you need to deal with superannuation by lifting the age,
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  Speaker 2: doing the means testing.
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  Speaker 4: You need to get it in with the capital gains tax.
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  Speaker 2: Is this I mean, is any of the stuff actually
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  Speaker 2: them thinking about it in kind of a novel way
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  Speaker 2: or is it them just listening to what we are
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  Speaker 2: saying and then putting it all in a report.
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  Speaker 3: You know, I think that's a key question. And so
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  Speaker 3: when the IMF comes here, they talk to the MPs,
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  Speaker 3: the Reserve Bank, the Treasury, other sort of department officials, analysts,
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  Speaker 3: and they put together a report. So a lot of
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  Speaker 3: You're right, what they're telling us is basically what the
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  Speaker 3: agencies are telling them. So this to me reads a
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  Speaker 3: lot like what the Treasury and Inland Revenue have been
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  Speaker 3: saying and their various long term insights briefings. But the
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  Speaker 3: thing is what the IMEF for saying does not align
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  Speaker 3: with what the politicians are doing. So, for example, there
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  Speaker 3: is no political party who is proposing higher taxes and
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  Speaker 3: less spending because you know that would in the short
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  Speaker 3: term at least that would hurt us. In the long term,
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  Speaker 3: that's what the experts think we need. So for example,
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  Speaker 3: with the tax idea they are. IMF thinks we need
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  Speaker 3: a land tax or capital gains tax. We need to
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  Speaker 3: broaden the tax base. IID has been saying similar things.
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  Speaker 3: But all the parties that are campaigning on higher taxes,
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  Speaker 3: like labor and the Greens for example, they want to
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  Speaker 3: spend that money. They don't want to tax more and
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  Speaker 3: use that money to pay down debt. They want to
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  Speaker 3: tax more to spend more. So while the agencies are
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  Speaker 3: saying one thing, and actually the IMEF for saying the
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  Speaker 3: same thing, that the politicians are saying something different because
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  Speaker 3: they need to win votes.
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  Speaker 4: Right right, different motivation obviously.
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  Speaker 2: Now do you get the reserve banks going to listen
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  Speaker 2: to the IMF calling for them to start hiking the rate?
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  Speaker 3: I think so that seems to be the consensus. And
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  Speaker 3: you know, interestingly, the IMF thinks the risks are skewed
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  Speaker 3: to the upside with inflation, so they think if if
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  Speaker 3: the central scenario doesn't happen, it's more likely that inflation
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  Speaker 3: will be higher than expected than lower than expected. So
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  Speaker 3: that does you know that that's an interesting view because
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  Speaker 3: I think the debate underway in New Zealand at the
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  Speaker 3: moment is a good one on the one hand, we've
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  Speaker 3: got these oil prices that are putting upward pressure on inflation.
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  Speaker 3: But on the other hand, the economy is really cool,
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  Speaker 3: and a cool economy means we don't go out and
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  Speaker 3: spend as much, and that suppresses inflation. So I think
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  Speaker 3: the IMEF recognizes the Reserve Bank is between a rock
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  Speaker 3: and a hard place. Normally, when you're lifting interest rates,
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  Speaker 3: you're doing so because things are running hot. But they're
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  Speaker 3: not running hot. They're actually pretty bad. We just have
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  Speaker 3: the high oil prices. So but I mean, the economists
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  Speaker 3: think that we will see a hike, and remember a
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  Speaker 3: hike from this point still keeps the o CR at
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  Speaker 3: a pretty stimulatory level like it if it hiked now,
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  Speaker 3: the rate would still be below neutral. So it's funny
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  Speaker 3: because it doesn't really feel that stimulatory, but it kind
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  Speaker 3: of technically is.
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  Speaker 4: Yeah, Janet, thanks very much, appreciate it. Look after yourself.
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  Speaker 4: Janet to Tips Cherny, who's The Herald's Wellington business editor.
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