March 23, 2026 • 23 mins
Every New Zealander at the moment is feeling the impact of the price of fuel.
It’s something Finance Minister Nicola Willis has mentioned time and time again.
She’s also made it incredibly clear that this government won’t make the same mistakes as the last – so, any financial assistance must be targeted, and temporary.
That’s why she’s announced extra support for low-to-middle-income families.
From April 7, about 143,000 working families with children will get an extra $50 a week through a boost to the in-work tax credit.
But, what else could the Government do? What about the rest of the population without kids who are also still struggling to make ends meet?
Today on The Front Page, Journalist and publisher of The Kākā, Bernard Hickey is with us to break down how a war about 15,000 kilometres away is affecting New Zealand’s economy, and New Zealanders’ wallets.
Follow The Front Page on iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.
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
Editor/Producer: Richard Martin
Producer: Jane Yee
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Speaker 1 (00:05):
Kiyota.
Speaker 2 (00:05):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by the New Zealand Herald. Every New
Zealander at the moment is feeling the impact.
Speaker 3 (00:19):
Of the price of fuel.
Speaker 2 (00:21):
It's something Finance Minister Nikola Willis has mentioned time and
time again. She's also made it incredibly clear that this
government won't make the same mistakes as the last, so
any financial assistance must be targeted, must be temporary. That's
why she's announced extra support for low to middle income families.
(00:41):
From April seventh, about one hundred and forty three thousand
working families with children will get an extra fifty dollars
a week through a boost to the in work tax credit.
But what else could the government do? What about the
rest of the population without kids, who are also struggling
to make ends. Men Today on the front Page, journalist
(01:02):
and publisher of The Khaka, Bernard Hickey is with us
to break down how a war fifteen thousand kilometers away
is affecting New Zealand's economy and New Zealander's wallets. First off,
Bernard an immediate reaction, what do you reckon?
Speaker 4 (01:21):
Well, this is as little as the government could do
and be judged to be doing something, but it's nowhere
near and across the board big piece of help for
people who are struggling with an extra thirty fifty one
hundred dollars a week in petrol. It excludes people who
are on a benefit or on New Zealand's evaluation, or
(01:46):
people who aren't in working for families but are struggling,
so those people who get the independent Earner's tax credit
they miss out. The government's argument is that while the
government can't afford it, it doesn't have the money. Well,
it's not how government it's works. They're not like you
or I. They literally can create money and spend it.
That's what they do every day, and that's what banks
(02:07):
do every day, and then they mop it up afterwards
with bond issues. And at the moment, the risk for
the economy is that everyone goes, well, we've had a
good shock. I better hold on to my money. I'm
not going to spend it because I'm going to have
to pay for it and fuel. And it's true, but
the risk is that you have a shock to how
(02:29):
people are thinking about spending money, and suddenly no one's
spending any money except on petrol and before you know it,
you've got an economic downturn. So the government needed to
do something, quistion, was it enough? And also I think
it's worth challenging their thinking around why the government can't
afford it. That's not how governments works. They don't operate
(02:51):
like households.
Speaker 2 (02:53):
If they can only afford though, to select one group
of people to receive this benefit, do you think they've
selected the right Because beneficiaries presumably don't use their car
to get to work every day, right.
Speaker 4 (03:06):
Well, perhaps they're taking their kids to school, or maybe
they're trying to get a job and they need to
drive to the job interview or to the MSc office
to sign up the forms to say they're.
Speaker 3 (03:16):
Trying to get a job.
Speaker 4 (03:18):
So in my view they are at least as worthy
and desperate need of that help as anyone else, probably more.
And certainly there's an awful lot of people who just
don't happen to have kids, but who were struggling. Maybe
they want to have kids, and they're not going to
get any help there either. And I remember this is
only just begun, So fifty dollars a week is useful
(03:41):
for the people who are going to get it, but
it's not wide enough to either, I think offset the
damaging effect of people having the shock and the worry
that it chills spending in the rest of the economy.
Speaker 2 (03:57):
And like you said, primarily focused on how he out
working families, and that's generally the group who does get
a lot of the benefits and does get a line.
I mean, we look at election year, we're probably going
to be seeing more working for families, benefits being announced,
things to help families, etc. Do you think single childless
people are being left out here?
Speaker 3 (04:16):
Well, that'll teach them for not having kids. I'm taking
this berthon.
Speaker 4 (04:21):
No, it is an unfair thing. We essentially have deified
children and families as the ones who deserve all our help.
Not surprisingly, there's a whole bunch of people who don't
have kids, and maybe they want to have kids, but
they can't afford to have kids because they're not getting
any help now. And that is one of the issues
(04:43):
we have more broadly in our society is at the moment,
the people with the money are the ones who can't
have kids anymore because they're over fifty or sixty. They
have a lot of wealth tied up, mostly in their homes,
sometimes in other assets. That wealth needs to go to
people who are just starting out their lives, who need
to build a home, who need to be able to
(05:05):
afford to invest in their kids or buy a bigger
car because they've got kids. Instead, they're looking ahead and
seeing that themselves not getting a leg up, not getting
the money from their parents if their parents are lucky
enough to have it, and us just sitting there going, well,
I'm not going to have kids then, I mean, you
say you want a higher fertility rate, Well, why don't
(05:27):
you help us? Because at the moment, this sort of thing,
and it's quite widespread across a lot of policies, says
if you've got kids, then you need help, but we're
not going to give you help before we have the kids,
which means that people don't have the kids. And that's
a problem, I think long run, and it's a symptom
of a society which has become unbalanced and unfair in
(05:49):
favor of all the rich people who happen to be
born early enough to get a cheap house and have
risen the value of that higher and poorer young people
who have no chance of getting to ouse because there's
no way they can borrow a hundred percent and because
the reserve being changed the rules halfway through and so
they're stuck. And this is another example of where the
(06:10):
people who were born at the wrong time are being
punished for it.
Speaker 1 (06:20):
The policy will cost up to three hundred and seventy
three million dollars. Importantly, this cost will be met from
within the budget twenty twenty six operating allowance, which we
have previously committed will not exceed two point four billion dollars.
That means the government will not be borrowing any more
(06:40):
than was previously planned to deliver this temporary and targeted
support funding. The policy this way will not add to
forecast debt and will not add to inflationary pressure.
Speaker 2 (06:55):
You mentioned that the government obviously as playing this part
of not being able to afford anything. I mean, I
understand we have been warned by ratings agency FETCH that
they're watching our government debt levels very closely. It's kept
the country's core rating at about a plus for now.
What does that actually mean? And do you think that
(07:16):
the government has been forced into being fiscally responsible appearing
so because of the big deal that they've made of
the COVID final report.
Speaker 4 (07:23):
Yeah, this is a choice the government's making. This isn't
about whether the financial markets will let them borrow or
whether the referees and global financial markets are blowing their
whistle and saying, get your hand out of that rock.
Speaker 3 (07:37):
You can't put that in there. They're not.
Speaker 4 (07:40):
This is ratings agencies trying to put some sort of
label on a thing. Ratings agencies remember rated all sorts
of stuff triple A before the global financial crisis and
blew up anyone who watches closely how ratings agencies operate.
Speaker 3 (07:56):
No, they're not.
Speaker 4 (07:57):
Really there to look after to the interests of the
people who have lent the money. They're there to look
after the interests of the people who are trying to
borrow money. That's where they get their money from. And
the global bond markets, which some politicians say are in
charge of the economy, they're the ones telling us what
(08:18):
to do. There's this old saying that James Carvill, the
Democratic strategists, said long time ago that if he was reincarnated,
he wanted to come back not as the pope or
the best baseball player in the world, but as the
bond market because he could beat up anyone.
Speaker 3 (08:33):
I've heard that one before, But.
Speaker 4 (08:36):
Bond markets don't beat up anyone anymore. Donald Trump is
doing absolutely extraordinary, horrible things. He's borrowing hand over first.
They're not punishing him. And when you look at how
bond investors work, they have so much money they want
to lend to governments, and governments don't want to borrow
from them.
Speaker 3 (08:55):
Why not, because.
Speaker 4 (08:57):
Governments believe that they're are off not borrowing. I actually
think it's an ideological thing. They're saying, we want a
small government. Small governments are better than big ones, and
that's simply not true. If you look at other small
economies like ours with four or five million people, the
ones that are most successful, that are growing the fastest,
(09:17):
that are the highest incomes, the best productivity growth are
the ones with the biggest governments. Denmark, Finland, Norway, places
like this.
Speaker 2 (09:27):
And do they have a lot of government there?
Speaker 3 (09:30):
Some of them do.
Speaker 4 (09:31):
And it's not a problem because remember, a government doesn't
have to go out and borrow money from the private
sector and spend it or tax it from the private
sector or spend it. A government spins it and then
goes out after the fact and mops it up to
make sure that it doesn't create inflation. Now, that is
a fair point. If you have too much money, if
(09:52):
you like that's printed by the government and banks, then
that is going to create inflation if it's more than
the resources that we've got. But we have hundreds of
thousands of people out of work right now. We have
all sorts of resources just sitting there doing nothing, and
they should be mobilized. And that's what governments should do. Remember,
a government is not a household, and when the government
(10:14):
chooses to not spend money, everything stops.
Speaker 3 (10:17):
You know.
Speaker 4 (10:18):
It's a bit like if you go into a shop
and everyone in the shop suddenly decides at once not
to spend any money, then nothing happens. Whereas a government
can go in there and start spending money to get
things circulating. Again, that's where the government has a balance
sheet it can use to essentially protect and to act
(10:40):
as a buffer. Now is that time. There's a lot
of talk about New Zealand wanting to save for a
rainy day and that we need to have a tight
budget to save for a rainy day. The rainy day
is here. Now's the time to use that debt to
essentially save people from a pretty tough time. This is
(11:01):
a big shock. This wasn't planned. It's no one's fault
apart from the Rans and the Americans and the Israelis.
And so this is where a government steps up, and
governments of both flavors have done this over the last
twenty years or so. Now you can argue about whether
it was well spent money or whether it was enough
or too much. But certainly John Key's government in twenty eight, nine, ten,
(11:24):
eleven and twelve with the global financial crisis and then
the Christich earthquakes did step up. They did spend a
lot of money. Now in theory they borrowed it. What
they actually did was printed the money and spent it
into the economy to keep things going. They didn't create
inflation that time around. Now, when it happened in twenty
twenty and twenty twenty one with COVID, we did get inflation. Now,
(11:47):
the current government argues that's because the government spent too
much money. That's a very debatable point. All around the world,
exactly the same thing happened, and it wasn't because New
Zealand printed money. It was ware everyone printed money at
the same time, and there was an energy price shock
that was the Russian invasion of Ukraine. So you can
(12:07):
very plausibly argue the inflation didn't come from government spending.
It came from central banks printing money, and it came
from an energy price shock. Now we just had the
energy price shock. The one thing we really need now
is for the government to do things to stop those
prices rising in other countries. What they're doing is to
stop the inflation flowing through from higher energy prices. Is
(12:31):
they are giving subsidies. You know, they are removing excise duties,
as the previous labor government did. Now the current government
argues that it is too broad a benefit that people
who didn't need it got the money. Well, that was
certainly the case in twenty twenty and twenty one when
twenty billion dollars was given.
Speaker 3 (12:52):
To small businesses and large businesses. Many of them didn't
give it.
Speaker 4 (12:55):
Back after they've suddenly discovered they didn't need it effectively
at all, up and bank accounts. So I think it's
worth challenging this idea a that we can't afford it,
and be that only a small proportion of the population,
you know, one hundred and fifty thousand families or so
are the ones who could get it. There are seven
hundred and fifty thousand other people who don't have families
(13:19):
but are getting the Independent Earnest Tax Credit who could
certainly do with that fifty dollars a week. And on
top of that, you've got a whole bunch of beneficiaries
and u ze on supernuitants who, particularly the ones who
are renting, definitely need it. So not thing's worth challenging the.
Speaker 3 (13:35):
Government on that.
Speaker 5 (13:41):
Well, right now, the government's gaining hundreds of millions of
dollars and winfall games from the increase in fuel prices,
because every time the petrol price goes up, the government's
GST take increases. They are literally raking in hundreds of
millions of dollars extra because of the increase in fuel prices.
I'm saying, if you give some of that money back
to people, that's going to be a good thing, and
(14:01):
it's going to help people through what is a really
big shock for a lot of household budgets.
Speaker 2 (14:07):
Why do you think they tapped into the Working for
Families tax credit that in work tax credit and not
just give a lump sum to everybody who they thought
may deem it necessary.
Speaker 4 (14:18):
Yeah, I mean the Donald Trump approach, you know, just
write a check and he signed it, Donald Trump, and
gave it to anyone. That was actually a very effective
intervention in the economy. Both Trump and Joe Biden did it,
and you could argue our previous government, the labor government
did it as well when they did their cost of
living payments, which was literally a lump sum just injected
(14:40):
into people's accounts. That's one way to do it, and
this is something we should think about a lot more
in future. How do we deal with these sorts of
crises and how do we in a moment of panic
when people are really worried and they're not spending money.
If everyone stopped spending their money all at once, you
have an economic collapse. And we've seen what happened when
everyone does that all at once. You know, that's what's
(15:03):
called a great depression. And that was why in twenty
twenty and twenty twenty one the government stepped in and
gave away cash. Now, of course that that also meant
that there are some people who got it who perhaps
really didn't deserve it or need it. You know, the
old the phrase that the government's used as the French
backpackers got the money, and there'd be a whole bunch
of billionaires. You've got the money too, And I can
(15:26):
see how that isn't a good look. But if you
are looking for something that is fast, that isn't you know,
lots of questions asked, and by the time you've asked
the questions, the crisis has come, gone or gotten worse,
then cash payments are a good idea. In fact, you know,
some of the hardest monetraists of all time, including Milton Friedman,
(15:48):
suggested that cash payments were a good idea when everything stops.
Speaker 3 (15:53):
He calls it helicopter money.
Speaker 4 (15:54):
This idea that the economy is suddenly ground to a halt,
no one's spending anything. One way you can solve that
is to fly above the crowd with a helicopter and
tip the cash out the door, and it'll flood down.
People will pick up the money off the ground, go
spend it, and get the economy going again. Now that's
one way to do it. I personally think that a
(16:15):
more effective way to do it would be to inject
it into everyone's bank account if they've got an ID account,
if they're already a taxpayer, and most people who would
need it already are. And if you want it to
be really cautious about how the money was spent, you're
worried people going to nip out there and by themselves
(16:35):
a good time. Well, you know, this is why we
have invented electronic money that can't be spent on all
sorts of dodgy things. So I think this is something
we need to think about in future, having a much cleaner,
faster way to apply cash more broadly in times of
(16:57):
crisis that doesn't just lie on things like the Urn
tax credit of working for families, which is what the
government's doing here.
Speaker 2 (17:05):
Yeah, actually I was talking of it reminds me. I
was talking to my parents at the weekend and they
live in South Australia and they mentioned to me, oh,
we got we got one hundred dollars worth of seafood,
but we only paid heart We only paid fifty dollars.
And I said, well, that seems like a good idea.
Why is that, Well, apparently the South Australian government has
given out subsidies for things like the seafood sector. I
(17:25):
think you can go stay at night at a hotel
or something in the Barossa or something for a bit cheaper.
Is that something that that could happen.
Speaker 4 (17:32):
I mean, there's been lots of ways you can do that,
and the governments around the world have come up with
all sorts of interesting ways. Simplest way, actually, if you're
being really brutal about it, is to cut GSTA from
fifteen percent to ten percent in a temporary way. Now
that might seem like an incredibly complicated thing to do,
it's not that hard, and that would be the way
(17:56):
to reduce prices. Apart from anything else. What you're delivering
is an off setting in deflationary shock to an inflationary shock.
But the most effective way that governments around the world
have ensured that this energy price shock doesn't flow through
to the rest of the economy is to make sure
that either there are bigger subsidies on petrel on diesel
(18:18):
or that the taxes you put on top of petrol
diesel are cut. And that's what the previous labor government did.
And you could argue, at a time when we're trying
to conserve fuel, you wouldn't want to encourage people to
use more of it by cutting its price.
Speaker 3 (18:33):
But what you can do is keep the price.
Speaker 4 (18:35):
The same by using your excise duties to offset the
increase in the basic cost of fuel, and that would
be one way to solve the issue. Now, it would
be more expensive from a government point of view, but
it would be more effective at spreading the load. I
think part of the issue here is that when COVID happened,
(18:56):
there are a lot of predictions of doom, thirty percent unemployment,
and people really threw the kitchen sink at everything, and
maybe they threw too much in the kitchen sink.
Speaker 3 (19:09):
In retrospect, they through the kitchen, that's right.
Speaker 4 (19:12):
And you know, maybe the price of the kitchen went
up a bit. Certainly a lot of houses that went
up a bit, but it meant we didn't have a depression.
Speaker 3 (19:21):
Now, how much is too much and how much is
not enough? It really is a Goldilock situation.
Speaker 4 (19:28):
And the approach that was taken in COVID was what
they call a least regrets approach. You know, you don't
want to be the one at the end of the
day who was too cautious and then we had a depression. Now,
no one's suggesting a depression of this case, but you've
got to remember we're at the end of a long
supply chain. We've just seen a doubling of diesel prices.
(19:52):
We are several weeks away, assuming all the ships that
we told are coming we arrive, and there are new
ones after that we don't know about.
Speaker 3 (20:03):
Yet that they arrive.
Speaker 4 (20:05):
You know, we're several weeks away from significant rationing, a
significant slow down in the economy simply because the trucks
can't move or the diesel, which really does fuel the
economy is not there. And so I think, yes, this
is one step. I suspect if things continue on, and
this war keeps going on, and that straight remains closed,
(20:28):
the government will have to look at other things. And
that's where it should look at things like cutting those
taxes to keep the price of diesel and petrol where
it is it doesn't rise out anymore, or look at
other ways to ensure those cash payments, if you like,
go broader than just those people I'm working for families.
Speaker 2 (20:46):
We mentioned GST before, and I was thinking in terms
of and this is something the opposition leader, Labor leader
Chris Heipkins brought up this morning as well, that if
you have, if you pay GST, obviously fuel prices are
going up, so GST is going up now the government's
presumably making hundreds of millions of dollars from that GST
from those fuel price increases.
Speaker 3 (21:08):
Is there something.
Speaker 2 (21:10):
Legislative that doesn't allow us to use that GST money
for emergency purposes?
Speaker 3 (21:16):
Or like, why why is it? Why isn't that a
little pot that we can dip in take they're taking it.
Speaker 4 (21:20):
It would be interesting to know how much the three
hundred million or so that it costs for this fifty
dollars a week for working for families, how much that
cost is because I suspect it's not that much more
than the extra GST coming in because of the increase
in fuel costs.
Speaker 2 (21:40):
So I think it's about if presumably if it ran
for a year, which they've put the cap on, it'd
be three seventy five million.
Speaker 4 (21:48):
The Yeah, I haven't done the numbers on how much
extra guic T you get when you have a diesel
price at you know, three dollars fifty and a ninety
one price at four dollars.
Speaker 2 (21:59):
More than likely more than three hundred exactly.
Speaker 4 (22:01):
So that's a really good point. It'd be worth me
after this, I'm going away and doing the calculations, because
you're right, there is a windfall benefit to the government
itself of high gas prices, high diesel and petrol prices.
And remember this is very they call it in elastic.
(22:21):
You know, in a lot of goods and services. You know,
if they put the price of the drinks at the
pub up, they double them or trible them, you're probably
not going to go to the pub. You'll think, well,
I can probably get away without having that beer. But
if you need the fuel to take your kids to
school or go to work or whatever, there's no choice.
You just have to pay. And that's the sort of
(22:43):
slightly frustrating thing is it's one of those goods, but
like the greats in a way where you're addicted to
it and you still need it. And this is one
thing where the government should be clear about what the
net result of the extra gustus this three hundred and
ninety million dollars over a year would be, and for
(23:06):
now most people think it'll be much less than a year.
Speaker 2 (23:08):
Thanks for joining us, Bernard.
Speaker 6 (23:09):
Yes, that's it for this episode of the Front Page.
You can read more about today's stories and extensive news
coverage at enzidherld dot co dot enz. The Front Page
is hosted and produced by me Chelsea Daniels Caine. Dicky
is our studio operator, Richard Martin, our producer and editor,
(23:32):
and our executive producer is Jane Ye.
Speaker 2 (23:35):
Follow the front page on the iHeart app or wherever
you get your.
Speaker 6 (23:38):
Podcasts, and join us next time for another look beyond
the headlines.
Kiyota.
Speaker 2 (00:05):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by the New Zealand Herald. Every New
Zealander at the moment is feeling the impact.
Speaker 3 (00:19):
Of the price of fuel.
Speaker 2 (00:21):
It's something Finance Minister Nikola Willis has mentioned time and
time again. She's also made it incredibly clear that this
government won't make the same mistakes as the last, so
any financial assistance must be targeted, must be temporary. That's
why she's announced extra support for low to middle income families.
(00:41):
From April seventh, about one hundred and forty three thousand
working families with children will get an extra fifty dollars
a week through a boost to the in work tax credit.
But what else could the government do? What about the
rest of the population without kids, who are also struggling
to make ends. Men Today on the front Page, journalist
(01:02):
and publisher of The Khaka, Bernard Hickey is with us
to break down how a war fifteen thousand kilometers away
is affecting New Zealand's economy and New Zealander's wallets. First off,
Bernard an immediate reaction, what do you reckon?
Speaker 4 (01:21):
Well, this is as little as the government could do
and be judged to be doing something, but it's nowhere
near and across the board big piece of help for
people who are struggling with an extra thirty fifty one
hundred dollars a week in petrol. It excludes people who
are on a benefit or on New Zealand's evaluation, or
(01:46):
people who aren't in working for families but are struggling,
so those people who get the independent Earner's tax credit
they miss out. The government's argument is that while the
government can't afford it, it doesn't have the money. Well,
it's not how government it's works. They're not like you
or I. They literally can create money and spend it.
That's what they do every day, and that's what banks
(02:07):
do every day, and then they mop it up afterwards
with bond issues. And at the moment, the risk for
the economy is that everyone goes, well, we've had a
good shock. I better hold on to my money. I'm
not going to spend it because I'm going to have
to pay for it and fuel. And it's true, but
the risk is that you have a shock to how
(02:29):
people are thinking about spending money, and suddenly no one's
spending any money except on petrol and before you know it,
you've got an economic downturn. So the government needed to
do something, quistion, was it enough? And also I think
it's worth challenging their thinking around why the government can't
afford it. That's not how governments works. They don't operate
(02:51):
like households.
Speaker 2 (02:53):
If they can only afford though, to select one group
of people to receive this benefit, do you think they've
selected the right Because beneficiaries presumably don't use their car
to get to work every day, right.
Speaker 4 (03:06):
Well, perhaps they're taking their kids to school, or maybe
they're trying to get a job and they need to
drive to the job interview or to the MSc office
to sign up the forms to say they're.
Speaker 3 (03:16):
Trying to get a job.
Speaker 4 (03:18):
So in my view they are at least as worthy
and desperate need of that help as anyone else, probably more.
And certainly there's an awful lot of people who just
don't happen to have kids, but who were struggling. Maybe
they want to have kids, and they're not going to
get any help there either. And I remember this is
only just begun, So fifty dollars a week is useful
(03:41):
for the people who are going to get it, but
it's not wide enough to either, I think offset the
damaging effect of people having the shock and the worry
that it chills spending in the rest of the economy.
Speaker 2 (03:57):
And like you said, primarily focused on how he out
working families, and that's generally the group who does get
a lot of the benefits and does get a line.
I mean, we look at election year, we're probably going
to be seeing more working for families, benefits being announced,
things to help families, etc. Do you think single childless
people are being left out here?
Speaker 3 (04:16):
Well, that'll teach them for not having kids. I'm taking
this berthon.
Speaker 4 (04:21):
No, it is an unfair thing. We essentially have deified
children and families as the ones who deserve all our help.
Not surprisingly, there's a whole bunch of people who don't
have kids, and maybe they want to have kids, but
they can't afford to have kids because they're not getting
any help now. And that is one of the issues
(04:43):
we have more broadly in our society is at the moment,
the people with the money are the ones who can't
have kids anymore because they're over fifty or sixty. They
have a lot of wealth tied up, mostly in their homes,
sometimes in other assets. That wealth needs to go to
people who are just starting out their lives, who need
to build a home, who need to be able to
(05:05):
afford to invest in their kids or buy a bigger
car because they've got kids. Instead, they're looking ahead and
seeing that themselves not getting a leg up, not getting
the money from their parents if their parents are lucky
enough to have it, and us just sitting there going, well,
I'm not going to have kids then, I mean, you
say you want a higher fertility rate, Well, why don't
(05:27):
you help us? Because at the moment, this sort of thing,
and it's quite widespread across a lot of policies, says
if you've got kids, then you need help, but we're
not going to give you help before we have the kids,
which means that people don't have the kids. And that's
a problem, I think long run, and it's a symptom
of a society which has become unbalanced and unfair in
(05:49):
favor of all the rich people who happen to be
born early enough to get a cheap house and have
risen the value of that higher and poorer young people
who have no chance of getting to ouse because there's
no way they can borrow a hundred percent and because
the reserve being changed the rules halfway through and so
they're stuck. And this is another example of where the
(06:10):
people who were born at the wrong time are being
punished for it.
Speaker 1 (06:20):
The policy will cost up to three hundred and seventy
three million dollars. Importantly, this cost will be met from
within the budget twenty twenty six operating allowance, which we
have previously committed will not exceed two point four billion dollars.
That means the government will not be borrowing any more
(06:40):
than was previously planned to deliver this temporary and targeted
support funding. The policy this way will not add to
forecast debt and will not add to inflationary pressure.
Speaker 2 (06:55):
You mentioned that the government obviously as playing this part
of not being able to afford anything. I mean, I
understand we have been warned by ratings agency FETCH that
they're watching our government debt levels very closely. It's kept
the country's core rating at about a plus for now.
What does that actually mean? And do you think that
(07:16):
the government has been forced into being fiscally responsible appearing
so because of the big deal that they've made of
the COVID final report.
Speaker 4 (07:23):
Yeah, this is a choice the government's making. This isn't
about whether the financial markets will let them borrow or
whether the referees and global financial markets are blowing their
whistle and saying, get your hand out of that rock.
Speaker 3 (07:37):
You can't put that in there. They're not.
Speaker 4 (07:40):
This is ratings agencies trying to put some sort of
label on a thing. Ratings agencies remember rated all sorts
of stuff triple A before the global financial crisis and
blew up anyone who watches closely how ratings agencies operate.
Speaker 3 (07:56):
No, they're not.
Speaker 4 (07:57):
Really there to look after to the interests of the
people who have lent the money. They're there to look
after the interests of the people who are trying to
borrow money. That's where they get their money from. And
the global bond markets, which some politicians say are in
charge of the economy, they're the ones telling us what
(08:18):
to do. There's this old saying that James Carvill, the
Democratic strategists, said long time ago that if he was reincarnated,
he wanted to come back not as the pope or
the best baseball player in the world, but as the
bond market because he could beat up anyone.
Speaker 3 (08:33):
I've heard that one before, But.
Speaker 4 (08:36):
Bond markets don't beat up anyone anymore. Donald Trump is
doing absolutely extraordinary, horrible things. He's borrowing hand over first.
They're not punishing him. And when you look at how
bond investors work, they have so much money they want
to lend to governments, and governments don't want to borrow
from them.
Speaker 3 (08:55):
Why not, because.
Speaker 4 (08:57):
Governments believe that they're are off not borrowing. I actually
think it's an ideological thing. They're saying, we want a
small government. Small governments are better than big ones, and
that's simply not true. If you look at other small
economies like ours with four or five million people, the
ones that are most successful, that are growing the fastest,
(09:17):
that are the highest incomes, the best productivity growth are
the ones with the biggest governments. Denmark, Finland, Norway, places
like this.
Speaker 2 (09:27):
And do they have a lot of government there?
Speaker 3 (09:30):
Some of them do.
Speaker 4 (09:31):
And it's not a problem because remember, a government doesn't
have to go out and borrow money from the private
sector and spend it or tax it from the private
sector or spend it. A government spins it and then
goes out after the fact and mops it up to
make sure that it doesn't create inflation. Now, that is
a fair point. If you have too much money, if
(09:52):
you like that's printed by the government and banks, then
that is going to create inflation if it's more than
the resources that we've got. But we have hundreds of
thousands of people out of work right now. We have
all sorts of resources just sitting there doing nothing, and
they should be mobilized. And that's what governments should do. Remember,
a government is not a household, and when the government
(10:14):
chooses to not spend money, everything stops.
Speaker 3 (10:17):
You know.
Speaker 4 (10:18):
It's a bit like if you go into a shop
and everyone in the shop suddenly decides at once not
to spend any money, then nothing happens. Whereas a government
can go in there and start spending money to get
things circulating. Again, that's where the government has a balance
sheet it can use to essentially protect and to act
(10:40):
as a buffer. Now is that time. There's a lot
of talk about New Zealand wanting to save for a
rainy day and that we need to have a tight
budget to save for a rainy day. The rainy day
is here. Now's the time to use that debt to
essentially save people from a pretty tough time. This is
(11:01):
a big shock. This wasn't planned. It's no one's fault
apart from the Rans and the Americans and the Israelis.
And so this is where a government steps up, and
governments of both flavors have done this over the last
twenty years or so. Now you can argue about whether
it was well spent money or whether it was enough
or too much. But certainly John Key's government in twenty eight, nine, ten,
(11:24):
eleven and twelve with the global financial crisis and then
the Christich earthquakes did step up. They did spend a
lot of money. Now in theory they borrowed it. What
they actually did was printed the money and spent it
into the economy to keep things going. They didn't create
inflation that time around. Now, when it happened in twenty
twenty and twenty twenty one with COVID, we did get inflation. Now,
(11:47):
the current government argues that's because the government spent too
much money. That's a very debatable point. All around the world,
exactly the same thing happened, and it wasn't because New
Zealand printed money. It was ware everyone printed money at
the same time, and there was an energy price shock
that was the Russian invasion of Ukraine. So you can
(12:07):
very plausibly argue the inflation didn't come from government spending.
It came from central banks printing money, and it came
from an energy price shock. Now we just had the
energy price shock. The one thing we really need now
is for the government to do things to stop those
prices rising in other countries. What they're doing is to
stop the inflation flowing through from higher energy prices. Is
(12:31):
they are giving subsidies. You know, they are removing excise duties,
as the previous labor government did. Now the current government
argues that it is too broad a benefit that people
who didn't need it got the money. Well, that was
certainly the case in twenty twenty and twenty one when
twenty billion dollars was given.
Speaker 3 (12:52):
To small businesses and large businesses. Many of them didn't
give it.
Speaker 4 (12:55):
Back after they've suddenly discovered they didn't need it effectively
at all, up and bank accounts. So I think it's
worth challenging this idea a that we can't afford it,
and be that only a small proportion of the population,
you know, one hundred and fifty thousand families or so
are the ones who could get it. There are seven
hundred and fifty thousand other people who don't have families
(13:19):
but are getting the Independent Earnest Tax Credit who could
certainly do with that fifty dollars a week. And on
top of that, you've got a whole bunch of beneficiaries
and u ze on supernuitants who, particularly the ones who
are renting, definitely need it. So not thing's worth challenging the.
Speaker 3 (13:35):
Government on that.
Speaker 5 (13:41):
Well, right now, the government's gaining hundreds of millions of
dollars and winfall games from the increase in fuel prices,
because every time the petrol price goes up, the government's
GST take increases. They are literally raking in hundreds of
millions of dollars extra because of the increase in fuel prices.
I'm saying, if you give some of that money back
to people, that's going to be a good thing, and
(14:01):
it's going to help people through what is a really
big shock for a lot of household budgets.
Speaker 2 (14:07):
Why do you think they tapped into the Working for
Families tax credit that in work tax credit and not
just give a lump sum to everybody who they thought
may deem it necessary.
Speaker 4 (14:18):
Yeah, I mean the Donald Trump approach, you know, just
write a check and he signed it, Donald Trump, and
gave it to anyone. That was actually a very effective
intervention in the economy. Both Trump and Joe Biden did it,
and you could argue our previous government, the labor government
did it as well when they did their cost of
living payments, which was literally a lump sum just injected
(14:40):
into people's accounts. That's one way to do it, and
this is something we should think about a lot more
in future. How do we deal with these sorts of
crises and how do we in a moment of panic
when people are really worried and they're not spending money.
If everyone stopped spending their money all at once, you
have an economic collapse. And we've seen what happened when
everyone does that all at once. You know, that's what's
(15:03):
called a great depression. And that was why in twenty
twenty and twenty twenty one the government stepped in and
gave away cash. Now, of course that that also meant
that there are some people who got it who perhaps
really didn't deserve it or need it. You know, the
old the phrase that the government's used as the French
backpackers got the money, and there'd be a whole bunch
of billionaires. You've got the money too, And I can
(15:26):
see how that isn't a good look. But if you
are looking for something that is fast, that isn't you know,
lots of questions asked, and by the time you've asked
the questions, the crisis has come, gone or gotten worse,
then cash payments are a good idea. In fact, you know,
some of the hardest monetraists of all time, including Milton Friedman,
(15:48):
suggested that cash payments were a good idea when everything stops.
Speaker 3 (15:53):
He calls it helicopter money.
Speaker 4 (15:54):
This idea that the economy is suddenly ground to a halt,
no one's spending anything. One way you can solve that
is to fly above the crowd with a helicopter and
tip the cash out the door, and it'll flood down.
People will pick up the money off the ground, go
spend it, and get the economy going again. Now that's
one way to do it. I personally think that a
(16:15):
more effective way to do it would be to inject
it into everyone's bank account if they've got an ID account,
if they're already a taxpayer, and most people who would
need it already are. And if you want it to
be really cautious about how the money was spent, you're
worried people going to nip out there and by themselves
(16:35):
a good time. Well, you know, this is why we
have invented electronic money that can't be spent on all
sorts of dodgy things. So I think this is something
we need to think about in future, having a much cleaner,
faster way to apply cash more broadly in times of
(16:57):
crisis that doesn't just lie on things like the Urn
tax credit of working for families, which is what the
government's doing here.
Speaker 2 (17:05):
Yeah, actually I was talking of it reminds me. I
was talking to my parents at the weekend and they
live in South Australia and they mentioned to me, oh,
we got we got one hundred dollars worth of seafood,
but we only paid heart We only paid fifty dollars.
And I said, well, that seems like a good idea.
Why is that, Well, apparently the South Australian government has
given out subsidies for things like the seafood sector. I
(17:25):
think you can go stay at night at a hotel
or something in the Barossa or something for a bit cheaper.
Is that something that that could happen.
Speaker 4 (17:32):
I mean, there's been lots of ways you can do that,
and the governments around the world have come up with
all sorts of interesting ways. Simplest way, actually, if you're
being really brutal about it, is to cut GSTA from
fifteen percent to ten percent in a temporary way. Now
that might seem like an incredibly complicated thing to do,
it's not that hard, and that would be the way
(17:56):
to reduce prices. Apart from anything else. What you're delivering
is an off setting in deflationary shock to an inflationary shock.
But the most effective way that governments around the world
have ensured that this energy price shock doesn't flow through
to the rest of the economy is to make sure
that either there are bigger subsidies on petrel on diesel
(18:18):
or that the taxes you put on top of petrol
diesel are cut. And that's what the previous labor government did.
And you could argue, at a time when we're trying
to conserve fuel, you wouldn't want to encourage people to
use more of it by cutting its price.
Speaker 3 (18:33):
But what you can do is keep the price.
Speaker 4 (18:35):
The same by using your excise duties to offset the
increase in the basic cost of fuel, and that would
be one way to solve the issue. Now, it would
be more expensive from a government point of view, but
it would be more effective at spreading the load. I
think part of the issue here is that when COVID happened,
(18:56):
there are a lot of predictions of doom, thirty percent unemployment,
and people really threw the kitchen sink at everything, and
maybe they threw too much in the kitchen sink.
Speaker 3 (19:09):
In retrospect, they through the kitchen, that's right.
Speaker 4 (19:12):
And you know, maybe the price of the kitchen went
up a bit. Certainly a lot of houses that went
up a bit, but it meant we didn't have a depression.
Speaker 3 (19:21):
Now, how much is too much and how much is
not enough? It really is a Goldilock situation.
Speaker 4 (19:28):
And the approach that was taken in COVID was what
they call a least regrets approach. You know, you don't
want to be the one at the end of the
day who was too cautious and then we had a depression. Now,
no one's suggesting a depression of this case, but you've
got to remember we're at the end of a long
supply chain. We've just seen a doubling of diesel prices.
(19:52):
We are several weeks away, assuming all the ships that
we told are coming we arrive, and there are new
ones after that we don't know about.
Speaker 3 (20:03):
Yet that they arrive.
Speaker 4 (20:05):
You know, we're several weeks away from significant rationing, a
significant slow down in the economy simply because the trucks
can't move or the diesel, which really does fuel the
economy is not there. And so I think, yes, this
is one step. I suspect if things continue on, and
this war keeps going on, and that straight remains closed,
(20:28):
the government will have to look at other things. And
that's where it should look at things like cutting those
taxes to keep the price of diesel and petrol where
it is it doesn't rise out anymore, or look at
other ways to ensure those cash payments, if you like,
go broader than just those people I'm working for families.
Speaker 2 (20:46):
We mentioned GST before, and I was thinking in terms
of and this is something the opposition leader, Labor leader
Chris Heipkins brought up this morning as well, that if
you have, if you pay GST, obviously fuel prices are
going up, so GST is going up now the government's
presumably making hundreds of millions of dollars from that GST
from those fuel price increases.
Speaker 3 (21:08):
Is there something.
Speaker 2 (21:10):
Legislative that doesn't allow us to use that GST money
for emergency purposes?
Speaker 3 (21:16):
Or like, why why is it? Why isn't that a
little pot that we can dip in take they're taking it.
Speaker 4 (21:20):
It would be interesting to know how much the three
hundred million or so that it costs for this fifty
dollars a week for working for families, how much that
cost is because I suspect it's not that much more
than the extra GST coming in because of the increase
in fuel costs.
Speaker 2 (21:40):
So I think it's about if presumably if it ran
for a year, which they've put the cap on, it'd
be three seventy five million.
Speaker 4 (21:48):
The Yeah, I haven't done the numbers on how much
extra guic T you get when you have a diesel
price at you know, three dollars fifty and a ninety
one price at four dollars.
Speaker 2 (21:59):
More than likely more than three hundred exactly.
Speaker 4 (22:01):
So that's a really good point. It'd be worth me
after this, I'm going away and doing the calculations, because
you're right, there is a windfall benefit to the government
itself of high gas prices, high diesel and petrol prices.
And remember this is very they call it in elastic.
(22:21):
You know, in a lot of goods and services. You know,
if they put the price of the drinks at the
pub up, they double them or trible them, you're probably
not going to go to the pub. You'll think, well,
I can probably get away without having that beer. But
if you need the fuel to take your kids to
school or go to work or whatever, there's no choice.
You just have to pay. And that's the sort of
(22:43):
slightly frustrating thing is it's one of those goods, but
like the greats in a way where you're addicted to
it and you still need it. And this is one
thing where the government should be clear about what the
net result of the extra gustus this three hundred and
ninety million dollars over a year would be, and for
(23:06):
now most people think it'll be much less than a year.
Speaker 2 (23:08):
Thanks for joining us, Bernard.
Speaker 6 (23:09):
Yes, that's it for this episode of the Front Page.
You can read more about today's stories and extensive news
coverage at enzidherld dot co dot enz. The Front Page
is hosted and produced by me Chelsea Daniels Caine. Dicky
is our studio operator, Richard Martin, our producer and editor,
(23:32):
and our executive producer is Jane Ye.
Speaker 2 (23:35):
Follow the front page on the iHeart app or wherever
you get your.
Speaker 6 (23:38):
Podcasts, and join us next time for another look beyond
the headlines.
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