Mana Mahi.

By Craig Rennie, New Zealand Council of Trade Unions | Te Kauae Kaimahi

During the election campaign National Finance Spokesperson Nicola Willis promised three things:

1) deliver the tax package without any borrowing,

2) without adding to inflation; and

3) regardless of the state the books were left in by the previous government.

The Minister of Finance and this government appears to have failed on all three of those tests. The government is borrowing an extra $17 billion over the forecast period. It is going to be issuing $12 billion as more debt over the forecast period. It is going to spend a little bit more than $14 billion in total in its tax plan.

So, what does that mean? It means that this government is borrowing to pay for tax cuts. If we didn’t have those tax cuts, we wouldn’t need to do the borrowing.

You can dress it up how you like, but it is a simple as A minus B equals C. Even economists like me can do this maths without having to take our socks off.

The Treasury has a fancy measure called the fiscal impulse. What that does is work out how much more demand the government is adding to the economy. In the next couple of years, that fiscal impulse is positive. More demand (caused in part by tax cuts) means more stuff being bought in the economy – meaning it is likely that inflation is likely to be higher. That is likely to put more pressure on interest rates, which will put more pressure on rents, and put more pressure on inflation. So, it has failed its second test.

Thirdly she promised to do it regardless of the state of the books. We know parts of the tax package actually haven’t been delivered. Parts of the tax package aimed at changing Working for Families tax changes – they are not going to get delivered. The Casino tax that was supposed to bring in $750 million dollars is now actually bringing in $190m. No foreign buyers tax. It has now failed on all three of those measures.

Regardless of whether it has passed her tests, the only important question needing to be answered is “does it actually do good stuff for Aotearoa New Zealand”? The answer there is no. We are cutting essential spending to deliver a tax package delivering 10 times the benefit for a couple who both earn $150,000 than it does to a couple of pensioners who are on super.