Labour’s fiscal plan labelled challenge

Economist says it’s achievable but there is little wriggle room further down track

Leading economist Cameron Bagrie says Labour’s fiscal plan is transparent and achievable. But it would be a “massive challenge” to deliver on the numbers as presented for the 2019 and 2020 Budgets when there would be nothing left for the cost pressures on government after health and education increases.

He congratulated Labour for coming up with a transparent plan.

“On the one hand, good on them for putting numbers down and taking them out three to four years.”

But he said there would be obvious pressure from areas such as law and order and core Government services other than health and education.

“There’s just nothing really left to get thrown at the remainder of government.”

He said he would characterise it as a challenge for Labour. “When I say it’s a challenge for them to stick and deliver on the numbers as presented, it is a massive challenge.

“They have got absolutely no wriggle room at all in the 2019 Budget unless they decide they are going to reprioritise spending or maybe run a low operating balance or have a little more debt.”

But he said there were also options to address that, including running a smaller surplus, cancelling some programmes, changing taxes or being less aggressive on repaying debt.

He was commenting after Finance Minister Steven Joyce waged fiscal war on Labour over its fiscal plan which was finalised last week after Treasury updated forecasts in the Pre Election Economic and Fiscal Update.

Just before the second leaders’ debate, Joyce claimed Labour had made an error with their figures and there was a $9.4 billion “fiscal hole”, because there was very little room for spending increases other than health and education. On average about half of new spending a government allocated each year was on education and health.

Labour’s finance spokesman, Grant Robertson, said Joyce should apologise for his “patently false and cynical attack on Labour’s fiscal plan”.

“He has actively misled New Zealander in a desperate and disingenuous hit job and owes them an apology.”

No economist or commentator has characterised it as a fiscal hole.

But some such as Bagrie have pointed out the likely pressure points.