The level of Public Service cuts looming in the next Budget were enough for Reserve Bank Governor Adrian Orr and a swathe of public servants to resign, but the enormity of what Free Market NZ Initiative acolyte Nicola Willis wants to do hasn’t been leaked to the public yet.
The truth is the Economy is stalling just as National amputate public spending.
Bernard Hickey is scathing…
The economic recovery is stalling
The economy is not doing what it was supposed to when PM Christopher Luxonsaid in January it was ‘going for growth.’
That’s clear in the BusinessNZ BNZ PSI survey results1 for March published yesterday, which showed a second month of contraction in the services sector, the biggest part of the economy. The companion PMI survey of manufacturers in March was published on Friday and showed only a tepid expansion, at a slower rate than the previous month.
There was also a surprise 0.8% fall2 in retail sales via electronic cards in March. (See charts of the day below.)
REINZ reported this morning that house sales fell a seasonally adjusted 0.3% to 7,640 in March from February nationwide, while sales volumes in Auckland fell a seasonally-adjusted 12.7% to 2.362. Seasonally adjusted prices fell 0.3% in March from February, Infometrics estimated, with prices were lower than a year ago for the eighth consecutive month.
A pro-cyclical fiscal tightening
Meanwhile, the Government is pushing on with its ever-tighter fiscal policy in the face of recessionary headwinds globally and locally, effectively enacting a pro-cyclical (ie worsening a recession) policy in conflict with the Reserve Bank, which has been conservative in its initial decision under a makeshift Governor.
RNZ reported from leaked documents yesterday the Government was considering shutting a $118 million per year education training programme that is well liked by schools and was set up with great fanfare in 2014 by the previous Government. Finance Minister Nicola Willis signalled last week the Government would double down on spending cuts to achieve a budget surplus by 2027/28.
That was in the face of Treasury has advice that Trump’s tariffs will slow global GDP growth and increase inflation, making it harder to achieve that surplus and therefore forcing even bigger cuts within Willis’ $2.4 billion per year operating allowances, most of which have already been spent in the 2025/26 year.
…Treasury is warning the Government…
Revealed: Tight Budgets force ‘reductions to public services’ – Treasury
Treasury officials have warned the Government that “significant reforms” or “reductions to public services” will be needed in the not-too-distant future if it sticks to its current, restricted spending track.
The Herald can reveal that even with this relatively tight spending, the Government will not post a surplus under the traditional Obegal measure until 2031, which will mark the longest period of Government deficits since the 1979-1994 deficits (which were measured quite differently).
Treasury officials also warned that the Government had planned so much capital investment – spending on items like schools, hospitals and roads – that it might have to cut spending earmarked for public services so it can fund the significant ongoing maintenance of those investments.
…and the IMF are begging us to tax more…
Tax reforms needed to bolster economic growth – IMF report
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- International Monetary Fund report urges action on finances, growth, housing
- Annual report expects NZ economy to grow 1.4 percent this year, 2.7 percent in 2026
- Structural reforms needed to tackle deficits, urges tax reforms
- Time to start serious talk on long term superannuation costs
…the impact of what National need to cut to afford their tax cuts and landlord loopholes isn’t clear to the public yet.
Once it is, all hell will break loose.
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“Murderous” is no hyperbole given what this pack of vandals have done so far…from Tobacco, firearms, returning Pseudo Ephedrine, defunding NGOs including food banks, downgrading school meals, choking minimum wage rises, underfunding public health, attacking all things Māori, to union busting. These measures combined, incrementally make peoples lives worse and affect their mental and physical well being.
High tax kills economy’s. This has been proven over and over and over.
We need get rid of some regulation, lower taxes, and increase productivity.
Grown the whole pie so everyone gets some.
So your solution is to tax cut our way into complete poverty and become a vassal state run by the wealthy and multinational corporations… pure genius.
There are very few examples of successful low tax economies. The US and Australia – for example – both considered to be historically strong economies – both have high levels of taxation and government spending. Most advanced European countries have high levels of taxation and spending also.
Could there be a link between economic growth and high levels of taxation and spending? Worth considering – unless you can find evidence of economically successful low tax countries.
Funny how some of the highest taxed people in the world such as the Scandinavian countries, are the happiest, the most productive and most sensibly-socialist. They have well-funded public institutions and everyone gets a share of the pie.
They feel they are taking their rightful places as citizens of their respective countries instead of being left out in the cold by your counter-productive plan.
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