Brad Olsen: Infometrics Principal Economist ahead of the Half Year Economic and Fiscal Update

We’ll get a clearer picture of the Government’s spending plans heading into an election year this afternoon. 

Treasury’s releasing the Half Year Economic and Fiscal Update at 1pm, alongside the Budget Policy Statement, setting out the economic outlook and spending priorities. 

Infometrics Principal Economist Brad Olsen Andrew Dickens governments are often expected to loosen the purse strings in an election year. 

He says the Government might spend less than they hoped if the books aren't looking too flash. 

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Episode Transcript

Speaker 1 (00:00):
Later today, the government's going to open their books and
let us take a look inside. It's called the High
Food the half year, the Economic and Fiscal Update. How
much money did the government get in in tax and
how are they spending it. It'll give us a clearer
idea of just how back on track we are. Brad
Olsen is the Infometric's chief executive and Josy Now hallo, Brad,

(00:20):
good morning. So what do you reckon? Is going to
be good news or bad news? I mean there's a
lot of people talking that the third quarter was pretty good.

Speaker 2 (00:28):
That's right. We have started to see a number of
I guess economic indicators that have started to show a
tune up, which is important. But of course the Treasury
would have done their forecast based on what we head
up until the second quarter, which was certainly a more
challenging period for the economy. Realistically, the economic recovery that

(00:49):
Treasury had been expecting through the course of twenty twenty
five hasn't been going as quickly as expected, and so
really from the High Food today, we're expecting a bit
of a downgrade head to what they said in the
budget in terms of how quickly the economic momentum is rebuilding,
and of course with that economic recovery taking longer, it
means that the government's not able to raise quite as

(01:11):
much tax revenue it's not seen as much spending or
anything else, but also has often had to incur higher expenses,
you know, higher benefit claims and similar Long story short,
it probably means that the government has been in a
forecast to spend more and earn a little bit less
than we probably thought back at the budget.

Speaker 1 (01:29):
This is the thing, isn't it. The tax the tax income,
the revenue that is, that's about a bit where we're
actually fathing. Because you can cut costs and government spending
as much as you like, but if of course your
revenue is going down as well, you end out just standing.

Speaker 2 (01:40):
Still exactly, and I mean standing still in some senses,
would still be not a bad position. As it is.
We know, and this has of course been a big
point of contention in the last couple of weeks, that
we're still effectively having to borrow to pay for ongoing
spending over the next couple of years. You know, we're

(02:01):
in deficit. The government books are indeficit until the late
twenty twenties. On the government's preferred measure there the over
gar x, and of course that means that New Zealand's
debt over time continues to accumulate. Now, the difficulty and
the challenge there is that at the same time as
clearly it would be better to be in a surplus,
there is also the difficulty of a lot of decisions

(02:25):
that have been made over the last couple of years
that have to continue to be funded. And unless you
are willing to take some pretty serious services and similar
away from people, that's sort of where the balancing act is.
And so one of the questions we're trying to work
out for ourselves today looking through the numbers, is what
does the government do heading into an election your budget

(02:45):
twenty twenty six. You know, sometimes there expectations from some
quarters for more of a spend up, but if the
government books aren't looking quite as slash, there's also a
reasonable expectation that the government might say, look, we were
going to spend X amount of money, but now we're
going to spend less than that to try and keep
a bit more control there. It is a fine balancing act.

Speaker 1 (03:05):
Absolutely. If you had to bet on Nikola versus Ruth Hoodwin.

Speaker 2 (03:11):
I don't like getting into that one. I mean, put
it this way, I'm a lot more interested in the
actual numbers and where they've gone. I mean, one of
the challenges of the last couple of years is given
how high wage inflation previously has been, one of the
reasons you've seen an increase in government spending over the
last couple of years is because the single biggest line
item New Zealand, sooper continues to go up. I mean, Andrew,

(03:31):
we still spend more money on New Zealand Super each
and every year than the entire education budget in New Zealand. Like,
in terms of making changes, that's probably the biggest difficulty.
You can make little nips and bucks here and there
when it comes to the budget, but really unless you're
going to hit some of those biggest spending items, and
they're generally in that sort of social area, the likes

(03:52):
of superannuation and summer, you really aren't going to touch
the sides in terms of the big spending challenges.

Speaker 1 (03:58):
Thank you, Brad Olsen from informt For more from Early
Edition with Ryan Bridge, listen live to News Talks it
B from five am weekdays, or follow the podcast on iHeartRadio.