Labour puts social deficit before debt

If Labour’s Grant Robertson is the next Finance Minister he will ditch the ambitious new net debt target set by Steven Joyce as part of the 2017 Budget or the current target.

The current target of reducing net debt to 20 per cent of GDP by 2020 would be replaced by getting it down to 10 to 15 per cent by 2025, Joyce recently announced.

“We believe there are infrastructure deficits and social deficits that are going to need some investment before we can get to the 20 per cent target,” Robertson said.

That had been written into Labour’s fiscal responsibility code with the Greens, potential coalition partners.

“We will review and revise those targets once we are in Government and we’ll see where we get,” said Robertson. “The last time Labour was in office we got debt down close to zero so of course we are in favour of reducing debt.”

He said the numbers Joyce had “plucked out” for the 2025 target were where the Treasury’s longer-term forecasts were going anyway.

National increased the debt as a result of the global financial crisis and the Christchurch earthquakes from 5.4 per cent of GDP in 2008 to 24.3 per cent now. The deficit peaked at a record $18.3 billion in 2011.

Joyce said he had revised the debt target to ensure New Zealand was better prepared for a future shock.

“The impact of those two events, the earthquakes and GFC, and the decisions we made to support people really used up 20 per cent of GDP’s worth of debt and that is very fresh in our memories. Then something like Kaikoura comes along and reminds everybody that actually, there’s no rule against another one. ”

Meanwhile New Zealand First leader Winston Peters says the Government will present a surplus on Thursday only because it has underfunded many public services.

“The Government will have to explain how there is a surplus after addressing all the reasonable demands that need money spent on them.”