April 30, 2025 • 17 mins
This month, the Government will deliver its second budget, and Finance Minister Nicola Willis is starting to tease what exactly we could see from it.
And basically — don’t expect much.
There will be just $1.3 billion of new discretionary operating spending in this year’s Budget, as the Government focuses once again on reducing spending by “billions” of dollars.
So where is all this money going, and what goodies could the Government offer up in such tight conditions?
Today on The Front Page, Wellington business editor Jenee Tibshraeny is with us to look through what to expect for the Budget.
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You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.
Host: Chelsea Daniels
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Producer: Ethan Sills
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Kiota.
Speaker 2 (00:05):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by The New Zealand Herald.
Speaker 1 (00:15):
This month, the government will.
Speaker 2 (00:17):
Deliver its second budget and Finance Minister Nikola Willis is
starting to tease what exactly we could see from it
and basically.
Speaker 1 (00:25):
Don't expect much.
Speaker 2 (00:27):
There will be just one point three billion dollars of
new discretionary operating spending in this year's budget as the
government focuses once again on reducing spending by billions of dollars.
So where is all this money going and what goodies
could the government offer up in such tight conditions. Today
(00:48):
on the Front Page, Wellington Business Editor Jane Tibschraney is
with us to.
Speaker 1 (00:53):
Look through what to expect for Budget twenty twenty five.
Speaker 2 (01:02):
Janey, let's start with Willis's speech to the Heart Valley
Chamber of Commerce. The main message there seems to be
that billions of dollars has been slashed.
Speaker 1 (01:11):
Is that fair?
Speaker 3 (01:13):
Not quite? Chelsea.
Speaker 4 (01:14):
Basically, previously Nikola Willis said that she would increase the
amount of money that the government spends on operating costs
by two point four billion dollars in the next year.
What she said in that speech was that should only
increase the spending the operation or spending by one point
three billion, So that's a cut from two point four
(01:35):
to one point three that is new spending. So the
government is actually still going to be spending more money,
and in many ways it needs to. We have population growth,
we have inflation. You know, all the services that the
government provides naturally cost more as as prices go up
(01:55):
and as more people come to New Zealand. But the
surprising thing that Nickola Willis revealed was that she wouldn't
increase her spending by as much as previously said. Now
that is significant because at two point four billion, that
was what she previously said, that was already looking tight
like at that level there already had to be reprioritizations
(02:19):
across government. So at one point three that does mean
that just to keep the current level of services ticking along,
there will have to be cuts somewhere across the public
sector to pay for that.
Speaker 5 (02:35):
At every step, we've asked ourselves to questions, One can
these dollars be justified when we are borrowing to pay
for them? And two can we be sure these dollars
will do more good in this area than if invested
in our most pressing priorities, like funding essential health services,
(02:58):
better educating our kids, ending New Zealand's security for ensuring
our future growth.
Speaker 2 (03:07):
Is it fair to say that a lot of the
focus on the budget will be to fund the rising
costs associated with things like healthcare. I saw that the
government has already allocated funds for health and new medicines
for FARMAC. Health really eats away at the budget each year,
doesn't it.
Speaker 4 (03:24):
Yeah, Look, health spending is huge. Health and New Zealand superannuation,
those are the two big ticket items, and as our
population ages, those costs just keep climbing it at a
pretty remarkable rate. I think what you're talking about here
is that previously the government promised to spend certain amounts
(03:44):
on health, on medicines through through FARMAC. It made those promises,
so much of the new spending that is expected to
occur has already been eaten up by that promise to
it to spend more on health. So again, that sort
of means that the government has to find even more
money than previously thought from elsewhere in its budgets to
(04:06):
pay to keep the lights on. So I think the
theme of this budget is really going to be cuts
to public services. The government has to find that money somewhere.
But when you look at the nominal amounts, so that
dollars and cents that the government spends that is continuing
to climb.
Speaker 2 (04:25):
What about the sweeteners that we always want to see
from the budget? Are there any promises of things like
tax carts or the like.
Speaker 3 (04:32):
I don't think so.
Speaker 4 (04:33):
Unfortunately, Nikola Willis has really tempered our expectations around this.
I think under the previous government we got used to
turning up on budget Day and going, Oh, what's the
creative new thing that the government has come up with
to support the economy. I strongly doubt there will be
anything like that that in this budget. It's worth noting
(04:55):
that for governments that the middle budget, so governments have
a three year term, the middle budget is often the
one where they kind of can do the g nally
things and then they save the positive things for the
final budget before the election. So a part of me
does wonder whether Nicola Willis is really knuckling down in
this budget and that might give a little bit more
(05:18):
room to be a bit freer at the next budget
ahead of the election. If I was to be cynical.
Speaker 1 (05:24):
Yeah, well that makes sense, doesn't it.
Speaker 2 (05:25):
Because the first budget it's like, well, here's some sweetness,
this is why you elected us, and then the last
ones like, well, here's some sweetness, because this is why
you should elect us again. So one of the big
sweetners last year was the childcare rebate policy. Hey, and
in the last week that's blown up in the government's face.
Speaker 1 (05:42):
What's happened there?
Speaker 4 (05:44):
Yeah, Look, I think that the government has said that
it got some modeling which suggested the uptake of the
support would be much larger than it's been, so it
has a bit of egg on its face there. The
other big support that came through last budget was, of
course the changes to those income tax brackets. So that
(06:05):
has effectively given I don't know if you call it
an income tax cut, but the brackets for income tax
have been adjusted partly to reflect inflation, which means we
are paying a bit leass income tax than would eitherwise
be the case. That was a pretty massive cost and
big election promise.
Speaker 5 (06:24):
Was my intention that we would make any changes to
charity tax law at the budget. But I won't be
making changes at the budget, and I can confirm that
because we are.
Speaker 3 (06:35):
Continuing work in this area.
Speaker 5 (06:37):
So if you take that example of sanitarium, if we
were to say we're now not exempting your business from tax,
what they could do is instead make their profits a
donation back to the Seventh day Adventist Church, their parent
and get around. And yet, well, yeah, that's right, they'd
get around it, and so they wouldn't in fact be
(06:58):
paying more tax.
Speaker 2 (07:03):
Have they looked at any alternative methods of bringing in
revenue asides from I guess raising everyone's taxes? I saw
that Willis has rejected a charities tax for this budget.
Speaker 1 (07:13):
Why is that?
Speaker 3 (07:14):
Yeah, that was really interesting.
Speaker 4 (07:16):
Actually, Nichola Willis made the point that changing the rules
around how much tax charities pay is really complicated. You know,
there are a lot of charities that operate that do
really good work for the community, and in fact, this
government does rely on charities a lot to do social work. So,
(07:37):
for example, community housing providers, this government in particular is
relying really heavily on them to build state houses so
that the government doesn't have to build the houses. It's
a nally piece of law because you have all that
legitimate stuff that goes on, and then you have the
controversial ones like Destiny Church or sanitarium, you know, charities
(07:59):
that are kind of businesses. So it sounds like differentiating
between the two and changing the law in such a
way that cracks down on the ones you want to
crack down on but supports the ones you want to
support is really tricky. Nikola Willis also said that actually
making changes might not bring in that much more tax
revenue for the government. So I think she said we'll
keep working on that, and the accountants i've heard comment
(08:22):
on that have said that's a good call.
Speaker 3 (08:23):
It's a Nali peace law. It's best. You know, you
have to get it right.
Speaker 2 (08:36):
We've seen a lot of backlash in the US towards
dough cutting billions from public services, and Donald Trump is
facing record low approval ratings in the polls there. Do
you think the government needs to be careful in how
much it cuts in case it faces this kind of
anti Trump sentiment at the ballot box next year?
Speaker 3 (08:56):
You know, I think the sentiment in New Zealand is
quite different.
Speaker 4 (09:00):
And I mean, every time there's a cut, someone is
going to be affected. Now, if you are affected by
a cut, you're not going to be happy. But I
believe the general sentiment in New Zealand at the moment
is that people are you know, they feel like a
lot of the spending that occurred under the previous government
hasn't produced the results that have benefited their lives materially.
Speaker 3 (09:24):
Now.
Speaker 4 (09:24):
Of course, it's easy to say that now, you know,
we don't know. We could have been in a much
worse position now had the previous government not provided all
that support during the pandemic. But I believe the majority
of New Zealanders at the moment, I think, want to
hang on to a bit more of the money they earn.
They don't want spending on, you know, things that are
not necessary. But I think it is hard because things
(09:47):
like healthcare and education they need to be I mean,
investment really needs to continue there. And those are the
areas I believe people really care about how long you're
waiting to get your medical treatments, or how long you're
waiting at the hospit or whether it's safe with your
kids are getting good eddication. Those areas the government desperately
needs to keep focused on.
Speaker 2 (10:07):
I think yeah, and I guess if you were walking
down the street and asking people what shouldn't be cut
health and education would be up there. Hey, is there
any an inclination of what could be cut more?
Speaker 4 (10:18):
Well, we've been playing the guessing game, and my best
guess at the moment is that the government might cut
or might means test the contribution it makes to key
we Saver members. So as it stands, if you contribute
a certain amount every year to your kei we Saver,
you get just over five hundred dollars a year from
(10:39):
the government. Now, the idea behind that was to encourage.
Speaker 3 (10:43):
People to contribute to key we Saver.
Speaker 4 (10:45):
With these costs of superannuation really rising and looking to
the future, key we Saver is going to play an
increasingly important part of helping us pay for our retirements.
So the government wants to encourage people to contribute. That's
what that five hundred dollars payment is therefore, but that
does cost about one point one billion dollars a year.
That's a lot. I feel like the government could means
(11:06):
test that, so it could say, look, if you earn
over a certain amount, you don't need to get this
free money from the government. We're only going to give
it to lower income owners. That would save a lot.
Nicola Willis has also you know I've been talking to
her a bit about this a bit recently, and she
is looking at reviewing key we save the settings. So
I wonder whether they cut that payment, and they could
(11:28):
even look to increasing the minimum contribution. So currently it's
three percent, but I do wonder whether they might say, hey,
look in a couple of years, the default contribution rate's
going to be, say four percent.
Speaker 3 (11:41):
Again.
Speaker 4 (11:42):
Superannuation is a real big issue for New Zealand, and
I think governments really need to look to help us
better equip ourselves for our retirements.
Speaker 6 (11:57):
I think New Zealanders can see every day the concert
of the government's decisions to prioritize tax cuts and spending
cuts over investing in the public services that New Zealanders
rely on. We see a health system descending into crisis,
we see record numbers of New Zealanders giving up and
leaving the country, and this government are going to make
all of those problems worse.
Speaker 2 (12:20):
In terms of less government spending, what does that do
to the Reserve Bank?
Speaker 4 (12:27):
So in theory, if the government spends less, that can
have a contractionary effect on the economy. If the government's putting,
you know, isn't increasing, it's spending as much that can
weigh on economic growth. Now, if that is the case
and the country needs growth, and then that does put
more of the onus on the reserve Bank to do
(12:50):
more to stimulate the economy. So currently the Reserve Bank
is it's not really it's been cutting interest rates the
OCRs at a level at the moment where it's still
actually a highy bit contractionary, but it's getting into that
sort of stimulatory level. Theoretically, if the government does less
to stimulate the economy, that does put pressure on the
(13:11):
Reserve Bank to do so by cutting interest rates a
bit more.
Speaker 3 (13:14):
Than it otherwise would.
Speaker 4 (13:16):
Now what that means is if interest rates are quite low,
that encourages people and businesses to borrow and spend. So
I do wonder whether we could get to a situation
where the government puts a bit of a lid on
its spending and its debt. But on the other side,
that means that individuals and businesses end up taking out
more debt. Already, traditionally New Zealand households are pretty indebted.
(13:40):
It's because our house prices are so high, our mortgages
are so big, so that there could be a bit
of a shift there, as I say, a slow down
an uptake of government debt and a speeding up of
uptake of private debt.
Speaker 2 (13:52):
But if the government did commit to more debt in
order to spend more fund some more big schemes like
I don't know, but a third harbor crossing in Auckland.
Speaker 1 (14:01):
What would be the negatives of doing that?
Speaker 2 (14:03):
Because you often hear the argument of debt being bad
for the country, but what is the harm of being
a bit slower to pay that back?
Speaker 4 (14:11):
Yeah, this is a really hotly debated issue, and I think,
you know, most sensible people agree that a debt is
good if it's invested in productive things, so you know,
infrastructure that as I said before, that supports productivity. Arguably
giving people wealthy people various payments like the Kei we
saver payment, well, is that really helpful?
Speaker 3 (14:33):
Maybe not.
Speaker 4 (14:34):
The issue of having lots of debt is that you
have to pay interest on that debt, and currently our
interest costs are heading towards ten billion dollars a year,
So that's ten billion dollars that could be spent on
hospitals or other things.
Speaker 3 (14:47):
You know, debt doesn't come for free.
Speaker 4 (14:49):
That is kind of a downside Another downside is that
a country's debt gets too high and the people who
lean to us around the world, the investors, if they think,
oh my god, New Zealand's debts too high, that the
country can't really pay it back, they could start seeing
New Zealander as being risky. And if they see New
Zealander as being risky, they'll say, okay, we'll buy our debt,
but we want to hire a return. So that ends
(15:11):
up pushing up the interest rates that they demand for
the debt that they buy, and that costs the country more.
I don't really think we're at that point at the moment.
Like we've seen bond yields go up in America, and also,
you know, because of Donald Trump's policies, investors are saying, oh,
this is a bit this country is looking a bit shaky,
so we're happy to lend to you, but we want
(15:32):
to hire a return. We also saw this in the
UK when Liz Trust was the Prime Minister. Briefly investors
got the shakes and bond yields went up, So that's
another downside. I don't think we're at that point. Something
else to consider is, well, what is the cost of
not borrowing and investing, you know, if we don't you know,
(15:53):
support our people, have a decent health system, all these
things that also costs us. Now an area that you
see that as ac the ACC is in a major deficit.
It's costing us a lot. ACCC is one of the
reasons for this. It's all very complicated, but one of
the reasons is because it's taking people longer to get rehabilitated.
Is it taking people longer to get rehabilitated because the
(16:15):
health system is not functioning well? They're along wait lists,
it takes ages to get an appointment. So maybe that's
an example of how underinvestment can cost you.
Speaker 3 (16:24):
Thanks for joining us, Janey, awesome. Thanks Chelsea.
Speaker 2 (16:31):
That's it for this episode of The Front Page. You
can read more about today's stories and extensive news coverage
at enzadherld dot co dot nz. The Front Page is
produced by Ethan Sells and Richard Martin, who is also
our sound engineer. I'm Chelsea Daniels. Subscribe to The Front
Page on iHeartRadio or wherever you get your podcasts, and
(16:54):
tune in tomorrow for another look behind the headlines.
Speaker 4 (17:00):
S
Kiota.
Speaker 2 (00:05):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by The New Zealand Herald.
Speaker 1 (00:15):
This month, the government will.
Speaker 2 (00:17):
Deliver its second budget and Finance Minister Nikola Willis is
starting to tease what exactly we could see from it
and basically.
Speaker 1 (00:25):
Don't expect much.
Speaker 2 (00:27):
There will be just one point three billion dollars of
new discretionary operating spending in this year's budget as the
government focuses once again on reducing spending by billions of dollars.
So where is all this money going and what goodies
could the government offer up in such tight conditions. Today
(00:48):
on the Front Page, Wellington Business Editor Jane Tibschraney is
with us to.
Speaker 1 (00:53):
Look through what to expect for Budget twenty twenty five.
Speaker 2 (01:02):
Janey, let's start with Willis's speech to the Heart Valley
Chamber of Commerce. The main message there seems to be
that billions of dollars has been slashed.
Speaker 1 (01:11):
Is that fair?
Speaker 3 (01:13):
Not quite? Chelsea.
Speaker 4 (01:14):
Basically, previously Nikola Willis said that she would increase the
amount of money that the government spends on operating costs
by two point four billion dollars in the next year.
What she said in that speech was that should only
increase the spending the operation or spending by one point
three billion, So that's a cut from two point four
(01:35):
to one point three that is new spending. So the
government is actually still going to be spending more money,
and in many ways it needs to. We have population growth,
we have inflation. You know, all the services that the
government provides naturally cost more as as prices go up
(01:55):
and as more people come to New Zealand. But the
surprising thing that Nickola Willis revealed was that she wouldn't
increase her spending by as much as previously said. Now
that is significant because at two point four billion, that
was what she previously said, that was already looking tight
like at that level there already had to be reprioritizations
(02:19):
across government. So at one point three that does mean
that just to keep the current level of services ticking along,
there will have to be cuts somewhere across the public
sector to pay for that.
Speaker 5 (02:35):
At every step, we've asked ourselves to questions, One can
these dollars be justified when we are borrowing to pay
for them? And two can we be sure these dollars
will do more good in this area than if invested
in our most pressing priorities, like funding essential health services,
(02:58):
better educating our kids, ending New Zealand's security for ensuring
our future growth.
Speaker 2 (03:07):
Is it fair to say that a lot of the
focus on the budget will be to fund the rising
costs associated with things like healthcare. I saw that the
government has already allocated funds for health and new medicines
for FARMAC. Health really eats away at the budget each year,
doesn't it.
Speaker 4 (03:24):
Yeah, Look, health spending is huge. Health and New Zealand superannuation,
those are the two big ticket items, and as our
population ages, those costs just keep climbing it at a
pretty remarkable rate. I think what you're talking about here
is that previously the government promised to spend certain amounts
(03:44):
on health, on medicines through through FARMAC. It made those promises,
so much of the new spending that is expected to
occur has already been eaten up by that promise to
it to spend more on health. So again, that sort
of means that the government has to find even more
money than previously thought from elsewhere in its budgets to
(04:06):
pay to keep the lights on. So I think the
theme of this budget is really going to be cuts
to public services. The government has to find that money somewhere.
But when you look at the nominal amounts, so that
dollars and cents that the government spends that is continuing
to climb.
Speaker 2 (04:25):
What about the sweeteners that we always want to see
from the budget? Are there any promises of things like
tax carts or the like.
Speaker 3 (04:32):
I don't think so.
Speaker 4 (04:33):
Unfortunately, Nikola Willis has really tempered our expectations around this.
I think under the previous government we got used to
turning up on budget Day and going, Oh, what's the
creative new thing that the government has come up with
to support the economy. I strongly doubt there will be
anything like that that in this budget. It's worth noting
(04:55):
that for governments that the middle budget, so governments have
a three year term, the middle budget is often the
one where they kind of can do the g nally
things and then they save the positive things for the
final budget before the election. So a part of me
does wonder whether Nicola Willis is really knuckling down in
this budget and that might give a little bit more
(05:18):
room to be a bit freer at the next budget
ahead of the election. If I was to be cynical.
Speaker 1 (05:24):
Yeah, well that makes sense, doesn't it.
Speaker 2 (05:25):
Because the first budget it's like, well, here's some sweetness,
this is why you elected us, and then the last
ones like, well, here's some sweetness, because this is why
you should elect us again. So one of the big
sweetners last year was the childcare rebate policy. Hey, and
in the last week that's blown up in the government's face.
Speaker 1 (05:42):
What's happened there?
Speaker 4 (05:44):
Yeah, Look, I think that the government has said that
it got some modeling which suggested the uptake of the
support would be much larger than it's been, so it
has a bit of egg on its face there. The
other big support that came through last budget was, of
course the changes to those income tax brackets. So that
(06:05):
has effectively given I don't know if you call it
an income tax cut, but the brackets for income tax
have been adjusted partly to reflect inflation, which means we
are paying a bit leass income tax than would eitherwise
be the case. That was a pretty massive cost and
big election promise.
Speaker 5 (06:24):
Was my intention that we would make any changes to
charity tax law at the budget. But I won't be
making changes at the budget, and I can confirm that
because we are.
Speaker 3 (06:35):
Continuing work in this area.
Speaker 5 (06:37):
So if you take that example of sanitarium, if we
were to say we're now not exempting your business from tax,
what they could do is instead make their profits a
donation back to the Seventh day Adventist Church, their parent
and get around. And yet, well, yeah, that's right, they'd
get around it, and so they wouldn't in fact be
(06:58):
paying more tax.
Speaker 2 (07:03):
Have they looked at any alternative methods of bringing in
revenue asides from I guess raising everyone's taxes? I saw
that Willis has rejected a charities tax for this budget.
Speaker 1 (07:13):
Why is that?
Speaker 3 (07:14):
Yeah, that was really interesting.
Speaker 4 (07:16):
Actually, Nichola Willis made the point that changing the rules
around how much tax charities pay is really complicated. You know,
there are a lot of charities that operate that do
really good work for the community, and in fact, this
government does rely on charities a lot to do social work. So,
(07:37):
for example, community housing providers, this government in particular is
relying really heavily on them to build state houses so
that the government doesn't have to build the houses. It's
a nally piece of law because you have all that
legitimate stuff that goes on, and then you have the
controversial ones like Destiny Church or sanitarium, you know, charities
(07:59):
that are kind of businesses. So it sounds like differentiating
between the two and changing the law in such a
way that cracks down on the ones you want to
crack down on but supports the ones you want to
support is really tricky. Nikola Willis also said that actually
making changes might not bring in that much more tax
revenue for the government. So I think she said we'll
keep working on that, and the accountants i've heard comment
(08:22):
on that have said that's a good call.
Speaker 3 (08:23):
It's a Nali peace law. It's best. You know, you
have to get it right.
Speaker 2 (08:36):
We've seen a lot of backlash in the US towards
dough cutting billions from public services, and Donald Trump is
facing record low approval ratings in the polls there. Do
you think the government needs to be careful in how
much it cuts in case it faces this kind of
anti Trump sentiment at the ballot box next year?
Speaker 3 (08:56):
You know, I think the sentiment in New Zealand is
quite different.
Speaker 4 (09:00):
And I mean, every time there's a cut, someone is
going to be affected. Now, if you are affected by
a cut, you're not going to be happy. But I
believe the general sentiment in New Zealand at the moment
is that people are you know, they feel like a
lot of the spending that occurred under the previous government
hasn't produced the results that have benefited their lives materially.
Speaker 3 (09:24):
Now.
Speaker 4 (09:24):
Of course, it's easy to say that now, you know,
we don't know. We could have been in a much
worse position now had the previous government not provided all
that support during the pandemic. But I believe the majority
of New Zealanders at the moment, I think, want to
hang on to a bit more of the money they earn.
They don't want spending on, you know, things that are
not necessary. But I think it is hard because things
(09:47):
like healthcare and education they need to be I mean,
investment really needs to continue there. And those are the
areas I believe people really care about how long you're
waiting to get your medical treatments, or how long you're
waiting at the hospit or whether it's safe with your
kids are getting good eddication. Those areas the government desperately
needs to keep focused on.
Speaker 2 (10:07):
I think yeah, and I guess if you were walking
down the street and asking people what shouldn't be cut
health and education would be up there. Hey, is there
any an inclination of what could be cut more?
Speaker 4 (10:18):
Well, we've been playing the guessing game, and my best
guess at the moment is that the government might cut
or might means test the contribution it makes to key
we Saver members. So as it stands, if you contribute
a certain amount every year to your kei we Saver,
you get just over five hundred dollars a year from
(10:39):
the government. Now, the idea behind that was to encourage.
Speaker 3 (10:43):
People to contribute to key we Saver.
Speaker 4 (10:45):
With these costs of superannuation really rising and looking to
the future, key we Saver is going to play an
increasingly important part of helping us pay for our retirements.
So the government wants to encourage people to contribute. That's
what that five hundred dollars payment is therefore, but that
does cost about one point one billion dollars a year.
That's a lot. I feel like the government could means
(11:06):
test that, so it could say, look, if you earn
over a certain amount, you don't need to get this
free money from the government. We're only going to give
it to lower income owners. That would save a lot.
Nicola Willis has also you know I've been talking to
her a bit about this a bit recently, and she
is looking at reviewing key we save the settings. So
I wonder whether they cut that payment, and they could
(11:28):
even look to increasing the minimum contribution. So currently it's
three percent, but I do wonder whether they might say, hey,
look in a couple of years, the default contribution rate's
going to be, say four percent.
Speaker 3 (11:41):
Again.
Speaker 4 (11:42):
Superannuation is a real big issue for New Zealand, and
I think governments really need to look to help us
better equip ourselves for our retirements.
Speaker 6 (11:57):
I think New Zealanders can see every day the concert
of the government's decisions to prioritize tax cuts and spending
cuts over investing in the public services that New Zealanders
rely on. We see a health system descending into crisis,
we see record numbers of New Zealanders giving up and
leaving the country, and this government are going to make
all of those problems worse.
Speaker 2 (12:20):
In terms of less government spending, what does that do
to the Reserve Bank?
Speaker 4 (12:27):
So in theory, if the government spends less, that can
have a contractionary effect on the economy. If the government's putting,
you know, isn't increasing, it's spending as much that can
weigh on economic growth. Now, if that is the case
and the country needs growth, and then that does put
more of the onus on the reserve Bank to do
(12:50):
more to stimulate the economy. So currently the Reserve Bank
is it's not really it's been cutting interest rates the
OCRs at a level at the moment where it's still
actually a highy bit contractionary, but it's getting into that
sort of stimulatory level. Theoretically, if the government does less
to stimulate the economy, that does put pressure on the
(13:11):
Reserve Bank to do so by cutting interest rates a
bit more.
Speaker 3 (13:14):
Than it otherwise would.
Speaker 4 (13:16):
Now what that means is if interest rates are quite low,
that encourages people and businesses to borrow and spend. So
I do wonder whether we could get to a situation
where the government puts a bit of a lid on
its spending and its debt. But on the other side,
that means that individuals and businesses end up taking out
more debt. Already, traditionally New Zealand households are pretty indebted.
(13:40):
It's because our house prices are so high, our mortgages
are so big, so that there could be a bit
of a shift there, as I say, a slow down
an uptake of government debt and a speeding up of
uptake of private debt.
Speaker 2 (13:52):
But if the government did commit to more debt in
order to spend more fund some more big schemes like
I don't know, but a third harbor crossing in Auckland.
Speaker 1 (14:01):
What would be the negatives of doing that?
Speaker 2 (14:03):
Because you often hear the argument of debt being bad
for the country, but what is the harm of being
a bit slower to pay that back?
Speaker 4 (14:11):
Yeah, this is a really hotly debated issue, and I think,
you know, most sensible people agree that a debt is
good if it's invested in productive things, so you know,
infrastructure that as I said before, that supports productivity. Arguably
giving people wealthy people various payments like the Kei we
saver payment, well, is that really helpful?
Speaker 3 (14:33):
Maybe not.
Speaker 4 (14:34):
The issue of having lots of debt is that you
have to pay interest on that debt, and currently our
interest costs are heading towards ten billion dollars a year,
So that's ten billion dollars that could be spent on
hospitals or other things.
Speaker 3 (14:47):
You know, debt doesn't come for free.
Speaker 4 (14:49):
That is kind of a downside Another downside is that
a country's debt gets too high and the people who
lean to us around the world, the investors, if they think,
oh my god, New Zealand's debts too high, that the
country can't really pay it back, they could start seeing
New Zealander as being risky. And if they see New
Zealander as being risky, they'll say, okay, we'll buy our debt,
but we want to hire a return. So that ends
(15:11):
up pushing up the interest rates that they demand for
the debt that they buy, and that costs the country more.
I don't really think we're at that point at the moment.
Like we've seen bond yields go up in America, and also,
you know, because of Donald Trump's policies, investors are saying, oh,
this is a bit this country is looking a bit shaky,
so we're happy to lend to you, but we want
(15:32):
to hire a return. We also saw this in the
UK when Liz Trust was the Prime Minister. Briefly investors
got the shakes and bond yields went up, So that's
another downside. I don't think we're at that point. Something
else to consider is, well, what is the cost of
not borrowing and investing, you know, if we don't you know,
(15:53):
support our people, have a decent health system, all these
things that also costs us. Now an area that you
see that as ac the ACC is in a major deficit.
It's costing us a lot. ACCC is one of the
reasons for this. It's all very complicated, but one of
the reasons is because it's taking people longer to get rehabilitated.
Is it taking people longer to get rehabilitated because the
(16:15):
health system is not functioning well? They're along wait lists,
it takes ages to get an appointment. So maybe that's
an example of how underinvestment can cost you.
Speaker 3 (16:24):
Thanks for joining us, Janey, awesome. Thanks Chelsea.
Speaker 2 (16:31):
That's it for this episode of The Front Page. You
can read more about today's stories and extensive news coverage
at enzadherld dot co dot nz. The Front Page is
produced by Ethan Sells and Richard Martin, who is also
our sound engineer. I'm Chelsea Daniels. Subscribe to The Front
Page on iHeartRadio or wherever you get your podcasts, and
(16:54):
tune in tomorrow for another look behind the headlines.
Speaker 4 (17:00):
S
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