Hi Friend,



Connor and I have just left the Beehive ‘lock up’ where we’ve spent the morning pouring through Nicola Willis’ so-called nano-budget’ so you don’t have to!



TL:DR: Grant Robertson should be ashamed. The books are in much worse a shape than we knew before the election. But worse are the 'fiscal risks' which weren't public – and ought to have been.



On the 'mini-budget' it's a non-event. Other than consolidating immediate 'stop-work' type savings, Nicola Willis is keeping her powder dry.



Our reading is Willis (and Christopher Luxon) need the bad news to sink in with New Zealanders before she can undertake the inevitable reform next year. No doubt they'll still be figuring out what that quite looks like.



Our comments to media are copied at the bottom of this email.



From the Beehive lock-up:



Today’s documents are not large – the Half Year Economic and Fiscal Update (this one booklet) <[link removed]> and four media releases from Willis’s office (now available here <[link removed]>). While the news from Treasury is shocking, the political response/announcements contain almost nothing we didn’t already know.



We think the fiscal update is probably the most significant Treasury update we have ever seen – coming just three months after the "pre-election" update, the fact it contains so much new material risks bad news is cause for very serious questioning of the senior Treasury officials.



While many in the media were absent (for the first time we can recall, the usually jam-packed Beehive hall was half empty) neither political editors of the two TV news networks even bothered turning up!



It’s all bad news, Friend



- There are seven new significant financial risks in today’s document that were not disclosed the public, or the opposition prior to the election.

- Crown tax revenue over the forecast period is now expected to be $1.6b lower than the same forecast made just 3 months ago.

- Deficits are larger – that means we're going to need a bigger debt clock!

- Unless we change tack, and quickly, by 2028, the Government will be spending more taxpayer money on paying just the interest on debt than they will be spending on primary and secondary schools.

- And the the return to surplus in 2027 is wafer thin. Three months ago it was $2.07 billion. Now it's just a $140 million forecast surplus.

- Economic growth is expected to slow and remain low. Despite Treasury’s figures bring finalised before Stats NZ's negative GDP figures (released last week) things are bleak.  

- GDP growth per capita (the only measure that really matters) will continue to decline for the next two years. New Zealand (and New Zealanders) is getting poorer.

- Inflation is expected to be higher than forecast prior to the election – this means families will face higher price rises and higher interest rates for even longer.

- Unemployment has increased and expected to now hit 5.2%

- Wage growth is slowing

- Productivity is also hitting a wall



Nicola Willis couldn't have been more clearer. The books are not in shape, much of it came as a surprise, and New Zealanders need to brace themselves for tough but necessary decisions ahead.



If we continue down this path, we're going to need a bigger Debt Clock!



Friend, it couldn't be clearer that the status quo isn't an option. Budget 2024 will be make or break in terms of whether New Zealand gets back into fiscal safety, goes for productivity, and growth and higher living standards.



With the cupboards bare, the Government will have to lean on supply-side economic reform to deliver higher living standards. Over the summer months, that's where our focus will be: what are the best 'bang for buck' reforms to deliver jobs, growth, and prosperity.



Political risks already showing



Based on the questions from the media to Nicola Willis during the lock-up the opposition parties are running hard with the line that 'now is not the time for tax relief' due to inflationary pressures.



Whether or not tax relief is inflationary is entirely dependent on how it's funded.  If Nicola Willis can credibly cut spending (remember those extra 16,000 bureaucrats Mr Luxon always talked about?!) she can both have her cake and eat it too.



But, to cut the waste and reform the public sector to deliver value for money will require a Minister of Finance with some courage. 



Time will tell.





Jordan Williams

Executive Director

New Zealand Taxpayers’ Union.



MEDIA RELEASE

Not since Mike Moore have New Zealanders been lied to like this – Grant Robertson should apologise



Strictly embargoed until 1:00pm, 20 December 2023

Not since Mike Moore have New Zealanders been lied to like this – Grant Robertson should apologise



The release of today’s Half Year Economic and Fiscal Update confirms the worst kept secret in Wellington; the fiscal challenges ahead are much worse than the public were told about prior to the election. 



From the Treasury lock-up, Executive Director of the Taxpayers’ Union, Jordan Williams, said: 



“Treasury has confirmed that the last government put New Zealand on a completely unsustainable fiscal path. Grant Robertson should be ashamed, as not since his mentor Mike Moore has a government been so dishonest with the public about what was really going on. He should be issuing an apology.” 



“It is very clear that tough decisions – and a brave Minister of Finance – are necessary to get the books back into shape.” 



“The economic backdrop is nearly as bad, with high net migration dragging us into positive growth – but only just.  On a per person basis, New Zealand still faces getting poorer in the short term.”   



“Now that we know that the Pre-election Economic and Fiscal Update was in fact a fantasy land, we need to ask ourselves how our fiscal reporting model and institutions have failed taxpayers.” 



“After Mike Moore lied to New Zealanders about the state of the books in 1990, the Fiscal Responsibility Act was put in place to ensure there were no post-election ‘nasty surprises’ like those which we have seen today.  Like back then, it is not so much the numbers, as the laundry-list of fiscal risks that are only seeing the light of day now. Items that Treasury has disclosed today were absent from the pre-election update; that is clearly not good enough.” 



“This feels a lot like 1990, which led to Ruth Richardson’s ‘mother of all budgets’ the following year. Budget 2024 is going to require Nicola Willis to be made of stern stuff.” 



“While responsibility for the poor state of the books rests with Grant Robertson, Treasury too must accept some responsibility for the lack of transparency.” 



“Under the last Secretary, Treasury became far more politicised and less reliable.  The new Secretary is an improvement, but this dropping of the ball in not being willing to deliver unwelcome news prior to the election suggests she has a long way to go to get Treasury’s former status back.” 



“We have previously called on the Government to conduct a ministerial or government inquiry into Treasury’s performance and public finance transparency. Today’s documents demonstrate the reason it is needed.” 



ENDS



























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New Zealand Taxpayers' Union Inc. - 117 Lambton Quay, Level 4, Wellington 6011, New Zealand

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