December 16, 2024 • 10 mins
The Finance Minister's painting a grim picture of the economy, signalling her Government will further cut into the Public Service.
Treasury's opened its books for the half-year economic and fiscal update, showing the expected surplus has been pushed out from 2027 to beyond 2030.
Nicola Willis has adjusted the way the surplus is calculated, but says come Budget day next year, she'll be forced to make some tough decisions.
She says from now on the official measure of surplus —officially called the OBEGAL— will no longer take into consideration the $4.1 billion ACC deficit.
She's calling this new measure OBEGAL-X.
Political Editor Jason Walls told Matt Heath and Tyler Adams that in terms of the fiscals, things are looking worse than expected, but they’ve done a bit of “swanky PR”.
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Episode Transcript
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Speaker 1 (00:09):
You're listening to a podcast from News Talks. It'd be
follow this and our wide range of podcast now on iHeartRadio.
Speaker 2 (00:16):
Just release the half yearly economic and fiscal update. Our
political editor, Jason Woolves has been in the lockup. Get a, Jason,
get a.
Speaker 3 (00:25):
They've released me from the lock up, and here I
be better.
Speaker 4 (00:28):
Than the locker. No, much worse than the locker. Think
about my days back in England. So, Jason, how bad
is our nation's fiscal situation?
Speaker 1 (00:37):
Oh?
Speaker 3 (00:37):
Look, you know Nikola Willis and the Finance and the
Prime Minister. Rather, we're holding true to their downbeat beat
forecast of what the economy was going to be looking
like when Treasury opened its books. It is, it is
grim reading and that was forecast. But I don't think
we forecast anything like this. I mean, the main headline
figure here is the expected surplus. That is how much
(00:58):
extra money the government has after it's got its taxes
and it's paid for all of the things such as healthcare,
superannuation and or everything that a government does. Right that
I was supposed to come into effect in twenty twenty seven.
That's when the surplus was supposed to be happening. That's
now being pushed out to beyond twenty thirty. Now, the
budget cycles only go in these sort of one, two, three, four, five, six,
(01:21):
sort of six yearly more really five yearly forecasts. When
you're looking forward, I mean, we can see the twenty
twenty five FORCAS here, twenty six, twenty seven, twenty eight,
twenty nine. It goes out to twenty twenty nine on
the obigal, which is essentially the measure of the surplus,
surplus or the deficit, and it's at a deficit at
the twenty twenty nine financial year. We can't see beyond that,
(01:42):
so we technically don't know if it's going to be worse.
So we can say at least twenty thirty is when
the government is going to be sniffing a surplus. But
there is a big butt here, you know that word
that I just mentioned, Obergel. I won't give you the
technical definition of this outside that is all you need
to know. It's a surplus or a deficit. The government has,
as I signaled, about forty five minutes ago or an
(02:04):
hour ago, changed the way that it measures this, so
it's taking out ACC's liabilities essentially ACC's deficit at the moment,
ACC has a four point one billion dollar deficit. Now,
what the government has done is they've essentially isolated that.
They've ring fenced this deficit so it doesn't sit alongside
the government surplus or deficit, which means that it's come
(02:27):
up with a completely new measure that is four point
one billion dollars better off. So by this new measure,
and get this, this is what they're calling it. They're
calling it so that the measure we have right now
is called Obergel. What they're calling it is Obergel X,
like it's the new iPhone or something like that. They've
just class they've slapped an X on the end of it,
and everything's going to be hunky dory. But by the
(02:48):
twenty twenty nine financial year they're anticipating a one point
nine billion dollar surplus by the ober Girl X measure.
So in terms of the fiscals, you know, things are
looking bad. Things are looking worse than the government expected.
But hey, they've done a little bit of swanky pr here.
Speaker 2 (03:04):
I would say, yeah, sounds like it. So obviously the
opposition are going to push back on that. What about economists, Jason,
do you think they'll look at that new way of
calculating the operating balance and say, hang on a minute,
that's a bit of trickery.
Speaker 3 (03:15):
To be honest, the economists might even agree with something
like this. I mean, if you look at actually what
ACC is. The argument that Nicola Willis was making in
there is that ACC is as an institution, it's set
up to handle large deficits and then large as large surpluses.
So if it's a bit down one year and then
(03:35):
a bit up the other year, this fluctuation shouldn't be
included in the surplus or the deficit measure because it's
not something that politicians or lawmakers need to be across
when it comes to making various different policies. For example,
I mean ACC sort of has its liabilities to some
degree ring fenced within there, So it doesn't really mean
that this is Nicola Willis's argument that it should be
(03:58):
part of the government's surplus or deficit measure. But you know,
the opposition are going to standard the rooftops and they're
going to cry, you've shifted the goalposts. You've shifted the goalposts.
You've done something. It makes your books look better than
they are by some creative accounting. Doesn't matter if it's
technically correct, or if it is actually a more prudent
way of measuring the ober gel in the first place,
(04:20):
it just looks a little bit naff from the government,
will be the opposition's argument.
Speaker 4 (04:24):
And what does this worsen expect result mean for every
day in New Zealanders over the next few years.
Speaker 3 (04:29):
Well, it's the million dollar question, isn't it. But at
the end of the day, I mean we did have
the Treasury in front of the Select the Finance and
Expenditure Select Committee a few weeks ago, and one of
their top brass was saying, essentially, when you boil it
down to it, when you push out a surplus, that
essentially means that the Reserve Bank has to make further
different decisions based on its official cash rate, and it
(04:50):
might not be able to loosen that, ie, bring it
down as quickly as it might have liked in the past.
And as we know, the ocr is directly correlated to
people's mortgage rates, so you can take about five steps
from the government surplus to your own mortgage and technically
there is some link there. In fact, it is probably
quite a strong link, but we'll have to be quite
down the track to realize that. The other thing Nikola
(05:13):
Willis was at pains to point out today during the
lockup was just how much worse things were than she
expected in the budget. We talked earlier today about how
we're expecting to see the New Zealand economy go back
into a technical recession when we see those GDP numbers
later this week, and that was top of her mind
when she was talking about the New Zealand economy today.
(05:33):
I mean she was talking about there are some good
news here. I mean anybody that is invested in housing,
or somebody there's got a house that they are running
a loss on. I mean the house prices are expected
to fall zero point one percentage points next year, then
going up to five point three, then five point eight
and then five point one by twenty twenty eight. So
some good news on the housing market, and there's some
(05:56):
other good news and employment. They're expecting unemployment to peak
at five point four percent in June next year, in
inflation to four below that two percent mark at some
point next year because of lower oil prices.
Speaker 2 (06:08):
A note that Nichola Willis ruled out selling state owned
assets in this term of government. Was that a surprise
that she put that line in the scene today, not
really a surprise.
Speaker 3 (06:17):
I mean, it was a good line of questioning from
one of the reporters in there, but it's just not nationals,
you know, for lack of a better term vibe. I mean,
if she would have come out and say this is
what we're doing in terms of looking to sell the
silverware to pay for the mortgage, then I think it
would have raised a few eyebrows. But what she did
is she at a is she was at pains to
point out the operating the operating allowance, which is essentially
(06:39):
how much an extra new money the government has to
play with every single budget will remain at very low
levels traditionally a lot lower than the Grant Robertson era
of fiscal prudency, I would say, but a lot of
listeners would probably push back on that of Grant Robertson's
time in the Treasury Office in the Treasury benches. But
(06:59):
she's essentially saying that when we look at that number,
it doesn't take into account the massive amounts of savings
the government will have to do when it's putting together
the budget. She's really really really playing down any expectations
of anything new and shiny when it comes to the
budget next year, essentially saying you will only be able
to get new budget initiatives for your departments if it's
(07:21):
an emergency. Anything else, don't count on it. Nikola Willis
is not having any of it.
Speaker 2 (07:26):
Now.
Speaker 4 (07:27):
I know the answer to this question, Jason, But as
the previous government taking any responsibility for their contribution to
the nation's fiscal problems, or are they just putting the
boat in for political gain.
Speaker 3 (07:35):
Listen, we're going to hear from the opposition in about
twenty minutes before they go into the house. But I
would imagine that's exactly what they're going to do. I
mean they will, we will ask them. We'll hang on
a second. Nikola Willis has been very candid here about
your participation in what the books like look like. Now.
I mean, the thing is, and I will say this
in the previous government's defense, and it's something like that.
(07:56):
This government seems to have abnesia over is COVID nineteen.
They never seem to mention it. It's just like everything
is really bad and they don't go into the detail. Why. Yes,
the previous government did make a lot of alarming spending decisions. Yes,
things absolutely got out of control on a lot of levels.
But we can't forget the sheer economic hit that COVID
(08:16):
had on not just the New Zealand economy but the
government books as well, and that's going to take a
long time to fix. And I don't think it's all
necessarily the last government's problem. I do think that they
for sure deserve a lot of blame and scrutiny for
the way that they handled it, But let's remember that
it was a pretty big, unprecedented economic event.
Speaker 2 (08:35):
Yeah, he's sir. Nichola Willis previously signaled she was looking
at requiring charities that are really businesses to pay more tax.
Was more set about that when she hopes to bring
that legislation in how much they can expect to get
from that, Well, she.
Speaker 3 (08:47):
Was hinting that that was coming on budget day. I
mean she's talked about this charities tax for some time now.
And another number that was quite baffling to somebody that
isn't a millionaire like myself, is that New Zealand between
the budget and between today's update, there has been thirteen
billion dollars less of tax revenue over that time. So
that's less money that the Finance minister has to play
(09:10):
with or to fund new initiatives, and what she was
talking about was a number of new initiatives, whether they
be on the quote revenue gathering side of things. Now,
revenue gathering is just an economic way of saying tax increases.
She was very clear it wasn't anything along the lines
of a capital gains tax, and it certainly wouldn't be
an increase in income tax or anything to that degree,
(09:32):
given the fact that the government has just pulled that down.
But she said she'd be looking at a charity's tax.
She's talked about value capture. When you have a new
highway built in the house, prices around the new highway
subsequently go up. She's talked about that, and she was
very candid about a foreign buyers tax. Now this has
been ruled out by one Winston Raymond Peters in the
coalition negotiations, but she said, you know, if Winston's willing
(09:55):
to change his mind this government or with her. She
was very specific to take off her Finance minister hat
and put on her National Party spokesperson hat. She was
very specific in saying if Winston wanted to reverse the
way that he looking at that she would be very
open to looking into a foreign buyers tax.
Speaker 2 (10:13):
Very interesting, Jason, well done, Thank you very much.
Speaker 3 (10:16):
Thanks Mack, I'll talk to you later.
Speaker 2 (10:17):
That is News Talks. He be Political editor Jason Walls.
Speaker 1 (10:20):
For more from News Talks B listen live on air
or online, and keep our shows with you wherever you
go with our podcasts on iHeartRadio
You're listening to a podcast from News Talks. It'd be
follow this and our wide range of podcast now on iHeartRadio.
Speaker 2 (00:16):
Just release the half yearly economic and fiscal update. Our
political editor, Jason Woolves has been in the lockup. Get a, Jason,
get a.
Speaker 3 (00:25):
They've released me from the lock up, and here I
be better.
Speaker 4 (00:28):
Than the locker. No, much worse than the locker. Think
about my days back in England. So, Jason, how bad
is our nation's fiscal situation?
Speaker 1 (00:37):
Oh?
Speaker 3 (00:37):
Look, you know Nikola Willis and the Finance and the
Prime Minister. Rather, we're holding true to their downbeat beat
forecast of what the economy was going to be looking
like when Treasury opened its books. It is, it is
grim reading and that was forecast. But I don't think
we forecast anything like this. I mean, the main headline
figure here is the expected surplus. That is how much
(00:58):
extra money the government has after it's got its taxes
and it's paid for all of the things such as healthcare,
superannuation and or everything that a government does. Right that
I was supposed to come into effect in twenty twenty seven.
That's when the surplus was supposed to be happening. That's
now being pushed out to beyond twenty thirty. Now, the
budget cycles only go in these sort of one, two, three, four, five, six,
(01:21):
sort of six yearly more really five yearly forecasts. When
you're looking forward, I mean, we can see the twenty
twenty five FORCAS here, twenty six, twenty seven, twenty eight,
twenty nine. It goes out to twenty twenty nine on
the obigal, which is essentially the measure of the surplus,
surplus or the deficit, and it's at a deficit at
the twenty twenty nine financial year. We can't see beyond that,
(01:42):
so we technically don't know if it's going to be worse.
So we can say at least twenty thirty is when
the government is going to be sniffing a surplus. But
there is a big butt here, you know that word
that I just mentioned, Obergel. I won't give you the
technical definition of this outside that is all you need
to know. It's a surplus or a deficit. The government has,
as I signaled, about forty five minutes ago or an
(02:04):
hour ago, changed the way that it measures this, so
it's taking out ACC's liabilities essentially ACC's deficit at the moment,
ACC has a four point one billion dollar deficit. Now,
what the government has done is they've essentially isolated that.
They've ring fenced this deficit so it doesn't sit alongside
the government surplus or deficit, which means that it's come
(02:27):
up with a completely new measure that is four point
one billion dollars better off. So by this new measure,
and get this, this is what they're calling it. They're
calling it so that the measure we have right now
is called Obergel. What they're calling it is Obergel X,
like it's the new iPhone or something like that. They've
just class they've slapped an X on the end of it,
and everything's going to be hunky dory. But by the
(02:48):
twenty twenty nine financial year they're anticipating a one point
nine billion dollar surplus by the ober Girl X measure.
So in terms of the fiscals, you know, things are
looking bad. Things are looking worse than the government expected.
But hey, they've done a little bit of swanky pr here.
Speaker 2 (03:04):
I would say, yeah, sounds like it. So obviously the
opposition are going to push back on that. What about economists, Jason,
do you think they'll look at that new way of
calculating the operating balance and say, hang on a minute,
that's a bit of trickery.
Speaker 3 (03:15):
To be honest, the economists might even agree with something
like this. I mean, if you look at actually what
ACC is. The argument that Nicola Willis was making in
there is that ACC is as an institution, it's set
up to handle large deficits and then large as large surpluses.
So if it's a bit down one year and then
(03:35):
a bit up the other year, this fluctuation shouldn't be
included in the surplus or the deficit measure because it's
not something that politicians or lawmakers need to be across
when it comes to making various different policies. For example,
I mean ACC sort of has its liabilities to some
degree ring fenced within there, So it doesn't really mean
that this is Nicola Willis's argument that it should be
(03:58):
part of the government's surplus or deficit measure. But you know,
the opposition are going to standard the rooftops and they're
going to cry, you've shifted the goalposts. You've shifted the goalposts.
You've done something. It makes your books look better than
they are by some creative accounting. Doesn't matter if it's
technically correct, or if it is actually a more prudent
way of measuring the ober gel in the first place,
(04:20):
it just looks a little bit naff from the government,
will be the opposition's argument.
Speaker 4 (04:24):
And what does this worsen expect result mean for every
day in New Zealanders over the next few years.
Speaker 3 (04:29):
Well, it's the million dollar question, isn't it. But at
the end of the day, I mean we did have
the Treasury in front of the Select the Finance and
Expenditure Select Committee a few weeks ago, and one of
their top brass was saying, essentially, when you boil it
down to it, when you push out a surplus, that
essentially means that the Reserve Bank has to make further
different decisions based on its official cash rate, and it
(04:50):
might not be able to loosen that, ie, bring it
down as quickly as it might have liked in the past.
And as we know, the ocr is directly correlated to
people's mortgage rates, so you can take about five steps
from the government surplus to your own mortgage and technically
there is some link there. In fact, it is probably
quite a strong link, but we'll have to be quite
down the track to realize that. The other thing Nikola
(05:13):
Willis was at pains to point out today during the
lockup was just how much worse things were than she
expected in the budget. We talked earlier today about how
we're expecting to see the New Zealand economy go back
into a technical recession when we see those GDP numbers
later this week, and that was top of her mind
when she was talking about the New Zealand economy today.
(05:33):
I mean she was talking about there are some good
news here. I mean anybody that is invested in housing,
or somebody there's got a house that they are running
a loss on. I mean the house prices are expected
to fall zero point one percentage points next year, then
going up to five point three, then five point eight
and then five point one by twenty twenty eight. So
some good news on the housing market, and there's some
(05:56):
other good news and employment. They're expecting unemployment to peak
at five point four percent in June next year, in
inflation to four below that two percent mark at some
point next year because of lower oil prices.
Speaker 2 (06:08):
A note that Nichola Willis ruled out selling state owned
assets in this term of government. Was that a surprise
that she put that line in the scene today, not
really a surprise.
Speaker 3 (06:17):
I mean, it was a good line of questioning from
one of the reporters in there, but it's just not nationals,
you know, for lack of a better term vibe. I mean,
if she would have come out and say this is
what we're doing in terms of looking to sell the
silverware to pay for the mortgage, then I think it
would have raised a few eyebrows. But what she did
is she at a is she was at pains to
point out the operating the operating allowance, which is essentially
(06:39):
how much an extra new money the government has to
play with every single budget will remain at very low
levels traditionally a lot lower than the Grant Robertson era
of fiscal prudency, I would say, but a lot of
listeners would probably push back on that of Grant Robertson's
time in the Treasury Office in the Treasury benches. But
(06:59):
she's essentially saying that when we look at that number,
it doesn't take into account the massive amounts of savings
the government will have to do when it's putting together
the budget. She's really really really playing down any expectations
of anything new and shiny when it comes to the
budget next year, essentially saying you will only be able
to get new budget initiatives for your departments if it's
(07:21):
an emergency. Anything else, don't count on it. Nikola Willis
is not having any of it.
Speaker 2 (07:26):
Now.
Speaker 4 (07:27):
I know the answer to this question, Jason, But as
the previous government taking any responsibility for their contribution to
the nation's fiscal problems, or are they just putting the
boat in for political gain.
Speaker 3 (07:35):
Listen, we're going to hear from the opposition in about
twenty minutes before they go into the house. But I
would imagine that's exactly what they're going to do. I
mean they will, we will ask them. We'll hang on
a second. Nikola Willis has been very candid here about
your participation in what the books like look like. Now.
I mean, the thing is, and I will say this
in the previous government's defense, and it's something like that.
(07:56):
This government seems to have abnesia over is COVID nineteen.
They never seem to mention it. It's just like everything
is really bad and they don't go into the detail. Why. Yes,
the previous government did make a lot of alarming spending decisions. Yes,
things absolutely got out of control on a lot of levels.
But we can't forget the sheer economic hit that COVID
(08:16):
had on not just the New Zealand economy but the
government books as well, and that's going to take a
long time to fix. And I don't think it's all
necessarily the last government's problem. I do think that they
for sure deserve a lot of blame and scrutiny for
the way that they handled it, But let's remember that
it was a pretty big, unprecedented economic event.
Speaker 2 (08:35):
Yeah, he's sir. Nichola Willis previously signaled she was looking
at requiring charities that are really businesses to pay more tax.
Was more set about that when she hopes to bring
that legislation in how much they can expect to get
from that, Well, she.
Speaker 3 (08:47):
Was hinting that that was coming on budget day. I
mean she's talked about this charities tax for some time now.
And another number that was quite baffling to somebody that
isn't a millionaire like myself, is that New Zealand between
the budget and between today's update, there has been thirteen
billion dollars less of tax revenue over that time. So
that's less money that the Finance minister has to play
(09:10):
with or to fund new initiatives, and what she was
talking about was a number of new initiatives, whether they
be on the quote revenue gathering side of things. Now,
revenue gathering is just an economic way of saying tax increases.
She was very clear it wasn't anything along the lines
of a capital gains tax, and it certainly wouldn't be
an increase in income tax or anything to that degree,
(09:32):
given the fact that the government has just pulled that down.
But she said she'd be looking at a charity's tax.
She's talked about value capture. When you have a new
highway built in the house, prices around the new highway
subsequently go up. She's talked about that, and she was
very candid about a foreign buyers tax. Now this has
been ruled out by one Winston Raymond Peters in the
coalition negotiations, but she said, you know, if Winston's willing
(09:55):
to change his mind this government or with her. She
was very specific to take off her Finance minister hat
and put on her National Party spokesperson hat. She was
very specific in saying if Winston wanted to reverse the
way that he looking at that she would be very
open to looking into a foreign buyers tax.
Speaker 2 (10:13):
Very interesting, Jason, well done, Thank you very much.
Speaker 3 (10:16):
Thanks Mack, I'll talk to you later.
Speaker 2 (10:17):
That is News Talks. He be Political editor Jason Walls.
Speaker 1 (10:20):
For more from News Talks B listen live on air
or online, and keep our shows with you wherever you
go with our podcasts on iHeartRadio
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