New Zealand Walks Budget Tightrope On Debt
WELLINGTON, New Zealand — New Zealand’s Finance Minister Grant Robertson will resist working up an Australian-style appetite for debt and deficit when he delivers New Zealand’s budget.
So while Robertson is free of the constraints of a coalition, his hands are tied by the pandemic, which has ballooned debt to uncomfortable levels.
“It is a budget put together still in the shadow of Covid-19,” he said.
“That means we require it to do two things.
“One is to continue to build the recovery. It also has to look to the medium and long term where we’ve taken on this enormous level of debt.
“We’ve got to look towards how that gets reduced.”
In recent weeks, Robertson — a fiscal conservative at heart — has enjoyed his pre-budget ritual of dropping breadcrumbs indicating the direction of the budget.
Last week, he issued a press release titled ‘economic resilience provides more options in budget 2021′, suggesting further spending.
But he has also shown his ability to stomp on the brakes, issuing guidance to severely restrain public servants’ pay and re-assessing previously announced infrastructure projects worth billions.
The most significant indicator of the budget’s direction comes from the books themselves.
The government accounts and the economy more broadly have avoided predictions of Covid-induced catastrophe.
Earlier this month, the Crown’s operating balance improved $NZ5.2 billion ($3.75 billion) above forecast, with debt sitting at 33.3 percent of Gross Domestic Product — $NZ6.6 billion ($4.7 billion) lower than predicted, and less than Australia.
Despite the better fiscal position, Robertson is unlikely to lash out on May 20, which is perhaps indicative of the electoral cycle.
Australia‘s budget was an election year spendathon, with billions of dollars splashed on new roads, tax cuts and more.
New Zealand is 2.5 years from another poll, giving Robertson no compelling political need to sweeten his offering.
If the finance minister is true to type, he will return to his first-term record, which was to fatten his surplus — now a thing of the past — and pay down debt.
The tension lies in the government’s many ambitious reforms, which without his money, may wither on the vine.
“We’ve said right from the start, our big three priorities were keeping New Zealanders safe from Covid-19, accelerating the economic recovery, and tackling challenges around housing, climate and children’s wellbeing,” he said.
“Those are three massive projects.
“On top of that, we have three significant bits of system reform already underway, and that’s health, planning and water.
“Each one of those on their own is a substantial piece of work and will lead to significant positive change.
“We are focused on addressing those big, those really big, challenges and that should contribute to a transformation of the country.”
(Edited by Vaibhav Vishwanath Pawar and Nikita Nikhil)