Robertson defends rules
Finance Minister Grant Robertson delivered a strong defence of his Government’s much criticised budget responsibility rules in a speech ahead of his first budget.
He has also promised a surplus across the economic cycle in the Budget, due to be delivered on May 17.
Speaking to a Westpac business breakfast yesterday morning, Robertson reassured the audience that the debt rules were not going anywhere, despite heavy criticism.
‘‘We have made this commitment to ensure that future generations of New Zealanders are in a position to be able to respond effectively to any shocks – natural or economic,’’ Robertson said.
‘‘We are relative to the rest of the world a small economy, we have a higher level of risk to manage than other economies and as a result debt levels have to be lower. There are substantive reasons for this.
‘‘We have been criticised by people who argue that these rules are too tight, and on the other hand by those who, despite all evidence to the contrary, believe Labour-led governments cannot carefully manage the Government’s books.’’
He said the Government would be able to do this while delivering expensive policies by cracking down on tax avoidance, slowing down the previous Government’s debt repayment track, and continuing to enjoy a higher-than-expected tax take.
Within the five months the Government had reprioritised about $700m of spending over the next four years.
‘‘Combined with our moves to crack down on speculators, tax dodgers and ensuring multi-nationals pay their fair share of tax, we have freed up $1.4 billion worth of funding for this Government’s priorities and investments over the next four years,’’ Robertson said.
However, Robertson cautioned that he would not be able to fix ‘‘nine years of neglect’’ in one budget – a caution that seemed timely given the backdown on GP fees that came to light in recent days.
The Government’s ‘‘budget responsibility rules’’ have come under a lot of criticism in recent months. The set of five rules put several fiscal constraints on the Government, including a commitment to get net core crown debt to 20 per cent of GDP by 2022.
In the face of infrastructure deficits, and low interest rates worldwide, some have criticised the rules as a ‘‘fiscal straitjacket,’’ – including economists Shamubeel Eaqub and Cameron Bagrie.
Even S&P’s analyst Anthony Walker has indicated a few points more of debt would be unlikely to change the country’s A-1+ rating.
The rules were also signed up to by the Green Party, but Marama Davidson expressed serious worry about them during the leadership election, and has said she isn’t sure if the party should run on them again in 2020.
Robertson took care to continue a narrative that saw National leaving the country in a mess he would not be able to fix in one budget.
‘‘We’ve come in after nine years of a government that demanded public services do more with less. This might sound great in theory, but in reality, as we have seen in many cases, the result was underfunded critical public services doing less with less,’’ Robertson said.
‘‘I don’t want to dwell on the past today, but you can all see the scale of the challenge in the examples of the urgent capital needs in our hospitals.’’