Robertson’s Fiscal Policy Statement Sets Up 2022 Economic Battle
The government will eagerly await the official growth figures expected today after Finance Minister Grant Robertson paved the way for the major economic battles of 2022, injecting an additional $ 6 billion into next year’s budget on last day of parliamentary sitting before Christmas.
In the annual budget policy statement that sets out the government’s priorities for the next budget, Robertson announced that the annual operating allocation – new spending – in next year’s budget would be increased by an additional $ 6 billion for cover massive government health costs. overhaul and various climate policies.
The boost brings planned government spending in 2022 to $ 128 billion, more than $ 58 billion more than in 2017, when Labor first took the seats of the Treasury. But a booming economy and higher than expected tax levies mean a budget surplus is now expected by 2023 instead of 2026.
While Robertson made an effort to emphasize that the money was one-time and would drop to $ 4 billion and then $ 3 billion over the next three years, he set the stage for the great economic debates of 2022: spending, debt and inflation. Statistics New Zealand will release the latest GDP figures this morning.
* Grant Robertson announces new climate emergency fund and $ 6 billion in new spending for the 2022 budget
* Prospects for upgrading the Treasury: lower unemployment, more taxes, less debt
* Budget 2020: the government unveils a $ 50 billion Covid-19 fund to keep the economy above water
The opposition lambasted the government for its spending figures, which Robertson vigorously defended as making up for years of underinvestment.
“Improved macro-budgets like higher taxes and lower expected net debt to the Crown are all fine, but that does not go with Kiwi families who are burnt by price hikes that far outweigh increases in kiwifruit. salary, “said Simon Bridges, spokesperson for the financial opposition. noted.
The ACT, which has campaigned for months on the cost of living, also criticized the government for pushing up prices, noting that inflation will be three times higher next year than budgeted.
“Labor’s response to Covid-19 has been driven by a swift blow of cheap credit and borrowed money. This money is now flowing through the economy and pushing up the price of everything,” said the head of the ACT, David Seymour.
Inflation issues remain, and the degree to which it has been imported or locally generated, continues to be debated.
“Large increases in public spending can be of concern in an economy with limited capacity, like the one we are in,” Kiwibank economists Jeremy Couchman and Mary Jo Vergara wrote in a note.
“Spending more could simply boost inflation more, forcing the RBNZ to redouble its efforts to cool the economy – with even higher interest rates. But the Treasury noted that in real terms (that is, by suppressing price movements), government spending growth is much quieter.
Robertson has been a strong advocate for the new spending, saying the healthcare system in particular needs longer-term thinking.
“What we have as a health system that is in urgent need of repair and reform; decades of underinvestment; a system with 20 DHB which produced neither effective health results nor efficient expenditure must now be reset. “
Robertson wouldn’t question if much of the money would be used to write off the board of health’s current deficits, but it seems like a strong possibility.
“We are dealing with a specific set of reforms which require the investment that we are going to make in order to give our health system the best possible chance of being able to function at its basic level.”
“We could continue to make short-term decisions or we could face the challenges of doing something… the health sector matters in everyone’s life in New Zealand. We have to put it on a stable basis, ”he said.
The government will also establish a new climate emergency response fund, “which will be earmarked for initiatives that help us meet our climate change goals,” said Robertson.
It will take $ 4.5 billion over the next four years, which should be generated by the emissions trading system. In the May budget, the government made a commitment to use any proceeds from the emissions trading system to address climate change.
The fiscal policy statement was released along with the semi-annual economic and financial update.
Thanks to stronger-than-expected economic growth and higher inflation, the government’s books are now expected to be in better shape than forecast in the May budget.
Core Crown debt is now expected to peak at $ 18.7 billion less than expected in May, at 40.1% of gross domestic product. The Treasury predicts that it will fall back to 30.2% by 2026.
Unemployment is expected to fall further to 3.1 percent from its already low level of 3.4 percent.