Hamish Rutherford

Finance minister claims the sums add up, but his predecessor isn’t so sure. reports.

Grant Robertson calls it his ‘‘anchor’’; a target which not only prepares New Zealand for some unknown future shock, it imposes discipline on a socially progressive government.

While he was Opposition finance spokesman, Robertson committed to reducing New Zealand’s net debt (total Crown debt less assets such as the NZ Super Fund) to 20 per cent of gross domestic product (in simple terms, total annual output of the economy), over five years.

With high household debt, the risk of earthquake and an economy which is still prone to the effects of international turmoil, Robertson agrees New Zealand needs low Crown debt (and 20 per cent is low). But the target is also about Labour proving it can be disciplined.

‘‘The goals I’ve set myself as finance minister ... are to be able to run a tight responsible fiscal management approach whilst making the investments that we think are necessary to lift New Zealanders’ well-being.’’

The target gets its first major test tomorrow when Treasury and the new finance minister publish the half-year economic and fiscal update, effectively a half-year scorecard for the Crown’s accounts.

While the debt target may seem modest – at the end of the financial year debt is forecast to be less than 23 per cent of GDP – it has already attracted scepticism from financial markets, and mocking from his opponents.

As well as making significant spending promises, from free tertiary education fees and extended paid parental leave to electricity subsidies for beneficiaries and superannuitants, Labour has ruled out revenuegenerating income tax increases (although it is cancelling National’s tax cuts).

Robertson’s plan was also developed on the basis of Labour’s promises alone; he now needs to find the money to pay for concessions made to get NZ First and the Green Party into Government.

Economists at ANZ said in a note that Robertson had left himself with little ‘‘wriggle room’’ and the debt target may slip over time.

ANZ’s Philip Borkin said net debt could end up being 22-24 per cent in 2022, adding, however, that the argument was over a ‘‘degree of excellence’’ with New Zealand’s debt still low by international standards.

But Robertson maintains he is ‘‘very confident’’ the target can be met.

‘‘We have the money to meet the plan, to meet the commitments we’ve made,’’ he said.

‘‘I’ve never denied that when you put together our plans, and those of our coalition partners, we have to be disciplined to meet those.

‘‘It’s ambitious, it’s a big programme. Mr Joyce [National’s finance spokesman Steven Joyce] likes to say ‘there’s 51 new initiatives in the programme’. It’s ambitious, and therefore we have to be disciplined in our overall spending track, but we have the money to do the plan we have put in place.’’

Although ministers have been charged with looking for areas of spending which do not fit the new Government’s priorities, Robertson played down the idea of surprise cuts.

Instead, he signalled that the issue could be one of juggling the timing of initiatives, with a degree of ‘‘phasing’’ the delivery of commitments.

Surprises on the need for capital spending – for example, money spent on building hospitals, where operating spending pays the staff – has been one of Labour’s major attacks on the former National Government since taking over the Beehive.

Almost each day in Question Time, Robertson’s colleagues have been lobbing him soft-ball questions to give him room to outline how he is learning that spending needs are more acute than National had let on.

The list of demands from across the public sector was not only growing in recent years, National had not properly examined or been up front about future spending needs, Robertson said.

‘‘The capital budget’s always over-subscribed, because there’s always more to do.

‘‘[But] that level of oversubscription had been growing over a number of years and has now reached a point where some serious work has to be done, the extent of which is bigger than, I think, the Government was openly acknowledging.

‘‘I’m certain they knew.’’ The pre-election fiscal update left National with $5.5 billion in unallocated capital spending over five years.

Labour’s plan left $10b, and Robertson said even this figure was under pressure. ‘‘We’re going to need every cent of that. And more.’’

Former Finance Minister Joyce was ridiculed for his attacks on Labour’s plan in the lead-up to the election, after he insisted there was an $11.7b ‘‘hole’’.

Joyce is now pointing to the warnings from economists as vindication, and claiming Robertson’s comments about the timing of spending shows how difficult the plan will be to achieve.

‘‘What’s obvious is his plan is a lot tighter than he was prepared to admit before the election. Before the election, it was all fully budgeted and fully costed.’’

Joyce claims at the same time as creating high expectations in many corners of New Zealand for more spending, Labour’s plan is quietly signalling restraint rarely seen outside of periods of crisis in its Budgets of 2018 and 2019.

‘‘Things are just unrealistically tight because they’ve made these big spending pledges,’’ Joyce said, meaning Robertson would have to show ‘‘about the same level of tightness as we were at the depth of the global financial crisis’’.

‘‘Their budget only works provided that they don’t have to do anything they didn’t expect to have to do. Governments all the time have to do things they didn’t expect to have to do and they have to leave enough room to do so.’’

Joyce claims Labour should not be ‘‘grizzling’’ about the capital budget when it is ruling out public private partnerships which cut the upfront cost of major projects. At the same time there were signs that the public service was seeking to use the change in Government to increase funding, with dire warnings contained in some of the briefings to incoming ministers.

‘‘Finance ministers very quickly get used to the fact that in good times and bad, there’s always many, many more people with ideas of how to spend money than there is money to spend,’’ Joyce said.

‘‘Suddenly things that were fine for some agencies [two months ago], they’re now saying ‘if we don’t get the money now it’ll be the end of the world.’ That happens all the time.’’

Come early 2018, ahead of May’s Budget, Robertson will be hit with a new wave of pleas for money, amid threats of crisis.

Joyce said Robertson’s impassioned speech in Parliament about giving students a year without fees was another signal to colleagues about ‘‘the virtues of spending’’.

‘‘It’s harder to argue against all your other ministers that their particular project doesn’t merit support in the way that his did.

‘‘The Finance Minister has to be the sort of grumpy one that says ‘that’s all good but there’s another side to this and that’s the taxpayer’. It’s very easy in the Cabinet with 19 spending ministers for the taxpayer to not get much of a look-in.’’