With Labour’s tax plans on hold, how big is their fiscal hole now?

Guest Post

Aunty Helen’s sock-puppet, Jacinda Ardern and her fellow travellers, along with their media bouncers, are claiming and hoping the ‘Tax Issue’ has gone away, to be dealt with in a more mature way on some future, brighter day.

It hasn’t. Because it’s only half the equation. You can’t simply wish away your public-relations problems on the tax front by pretending they’ve been put in a coma for three years without addressing the Expenditure issue the extra Taxes were designed to deal with.   

The dirty little secret is that—despite the proposed increases in taxes, divulged and un-divulged, Labour still had a big-spending problem: as usual. Slipped into the shonky sums on Robbo’s Fiscal Forecast was their means of dealing with it: the deferment of debt repayment.

Labour’s planned spending doesn’t, and never did, add up without huge increases in tax; over and above the announced cancellation of tax-cuts in April next year. Their projected shortfall by FY 20/21 was already $8.2B. They planned to ignore the vast bulk of those extra costs, initially, by not paying the mortgage—to screen the reality from the public and taxpayers. That’s why there’s a big difference in the Core Crown debt projected by Labour relative to the Nat’s by 20/21. The Treasury PREFU projection has Core Crown debt at $60.8B debt under National, under Labour it’s $67.8: $7B dollars higher.

Now Labour have a big problem; or they would if the media held their feet to the fire. They planned the now-on-hold and undisclosed sneaky-taxes to bring in an additional $6B by the end of their first term—by forgoing that revenue Labour has to: a) reduce spending, or b) borrow more money. A word to the wise; option ‘a’ won’t happen, it will be financed by borrowing and will appear on the bottom line of Core Crown debt; adding another $6B to Robbo’s earlier published figure.

That’s important. How important?

The latest OECD Economic Survey of New Zealand makes interesting reading; it’s unbiased, mainly positive, and where criticism is required it’s both constructive and instructive. In the entire report only one matter is considered crucial to our economic outlook:

“As a small economy highly exposed to global shocks and natural disasters, it is crucial for New Zealand to continue to have low levels of government net debt. To this end the government’s fiscal strategy is to reduce net core Crown debt to 10-15% of GDP by 2025.”

That Labour will risk our economic stability by increasing Crown debt to finance election bribes tells you all you need to know about why they must not be anywhere near the till while you’re not watching. Because they are fiscally reckless and incompetent.

 

-idbkiwi

 


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