Nicola Willis: Finance Minister on the Government's financial update revealing surplus won't return until 2030

The Government's devised a new measure for counting its coins, which gives it a more positive look.

Treasury reports the Government now won't hit surplus before 2030 at the earliest, rather than 2027.

But the Finance Minister says the official measure will no longer consider the $4.1 billion ACC deficit, putting the books in the black mid-2029. 

Nicola Willis says the Government inherited a tough set of economic conditions.

"As we look ahead, we are seeing the scars that were left by the huge spending policies of the last Government in the wake of Covid - they set us on a path that was not sustainable and we've now got the tough job of cleaning it up."

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Episode Transcript

Speaker 1 (00:00):
Of New Zealand's financial troubles confirmed today and things look
even worse than we fared. There's no surplus in sight
and the books will stay in the read until at
least twenty twenty nine, and that's only thanks for a
bit of accounting trickery that will see ACC's deficit removed
from the books. The Finance Minister, Nicola Willis is with
me on the show. Minister, thank you very much for

(00:21):
your time. On a scale of one to ten, where
do you put this? How bad do you put this?

Speaker 2 (00:27):
Oh? Well, look, this is a tough set of books,
there's no question about it. We've seen a downgrade in
the forecast assumptions that Treasury were making prior to the election.
They were essentially too optimistic before the election and that
has an impact both on the growth rate we're expecting,
the revenue we're going to receive, and our path back
to getting the books back in balance. But we remain

(00:47):
resolute what we need to do now is keep that
fiscal discipline, that careful spending going and really drive growth
across the economy. The good news is that's what we're doing,
and there is a forecast recovery to sustained growth next year,
and that's exactly what New Zealand needs.

Speaker 1 (01:02):
Yeah, but on a per capita basis, it's down point
six percent next year. It's hardly thrived till twenty five.

Speaker 2 (01:09):
Look, we've inherited a very tough set of economic conditions,
and as we look ahead, we are seeing the scars
that were left by the huge spending policies of the
last government in the wake of COVID. They set us
on a path that was not sustainable. We've now got
the tough job of cleaning it up and we're going
to get on and do exactly that. The good news
is New Zealanders have elected a government that's up to

(01:31):
this task.

Speaker 1 (01:32):
You're spending less than they were, but you're still spending more.
You're still borrowing more and not cutting as much. In
other words, we're still having You know, our borrowing is
going to go up sixteen percent, Our government debt is
going to go up sixteen percent at assuing of bonds.
Because of this, it's four times more than the economist's thought.

Speaker 2 (01:51):
The important thing there is that is not the result
of any fiscal or policy decisions the government's taken. That
is the result of adjust months, and the treasure is
forecast assumptions about long run productivity and the size of
the recession we've been in. So what we're doing is
controlling what we.

Speaker 1 (02:08):
But you haven't responded with fiscal policy changes.

Speaker 2 (02:13):
We have responded strongly to the fiscal situation at budget
time by reducing our not just tring allowances.

Speaker 1 (02:19):
Not this time. Why haven't you, given the books have
deteriorated so much between budget and now, have you not
changed your fiscals now?

Speaker 2 (02:27):
Well, I've always said that I'm not going to overreact
to changes in the forecasts up or down, and that
we are deliberately taking a medium turn sustainable approach to
fiscal consolidation. You're right, there is an alternative with more
aggressive short term measures, like a big increase in tax
or big slashing to spending. And the judgment we've made
is actually that would come at a cost both to

(02:49):
the economy and its recovery, but also to New Zealanders.
So ours is a balanced course that we're charting. It's
still going to be challenging, it's still going to involve
significant trade offs in order to put the extra spending
into health, into education and to the police into areas
that really need it. We're going to have to reprioritize
lower value spending from other parts of government and really

(03:09):
keep a lid on that in a way that hasn't
been the case in recent years. So you are going
to see a much more fiscally disciplined approach.

Speaker 1 (03:16):
From US Taxpayers Union says. The fact is, despite the
government being elected on a platform of cutting spending, Nickela
Withllus continues to spend even more than Grant Robertson and
kick the fiscal can down the road.

Speaker 2 (03:27):
Well, I would just put my operating allowances up against
his any day of the week. They are the lowest
they've been since twenty seventeen. That's our discretionary spending. The
last budget, we delivered twenty three billion dollars worth of
savings and we did that with just a few months
to find them. We've now had a year. We're going
to find more savings and it's important that we do

(03:49):
because everyone needs to remember that the money doesn't come
from a magic tree at the bottom of the garden.
It comes from New Zealander's pockets, and we're a government
that wants to make sure that we keep the finances
in good order. But we do it by being disciplined
about our own spending.

Speaker 1 (04:04):
Excluding the ACC deficit from your books makes them look better.
But is it the right thing to do? Treasury says no.

Speaker 2 (04:13):
Well, actually, there's been an independent economist who has just
come out. He's from B and Z and he makes
the point that ACC is a self funded Crown entity
and that fiscal policy should not be adjusted to compensate
for what should be a long run thing. And he
agrees with that stance. So it's not just me who
thinks this is sensible. This is about saying, look, ACC

(04:33):
is a long run insurance scheme. It needs to fund
itself over the long term. It's inappropriate to make immediate
changes to our fiscal policy in the next four years
to compensate for a deficit or surplus in any one year.

Speaker 1 (04:45):
Are there other government agencies in similar positions that you
could look to pick off and take out and improve
the look of the books.

Speaker 2 (04:52):
We're not going to do that. This was the result
of a review. No, we're happy with our the Garleex measure.
That's going to be what we're going to target. We're
targeting a surplus in twenty seven twenty eight financial year
by this measure, we think that's the appropriate way to
measure the government's spending balance.

Speaker 1 (05:10):
Minister, when will people feel like When are we going
to feel like we're actually getting somewhere as a country,
because we haven't felt like that in a very long time,
and next year we're looking at and we're not even
looking at growth on a per capita next year. It's
not until the year after that we get to experience
that again, that feeling.

Speaker 2 (05:28):
Yeah, I totally get what you're saying. New Zealand has
been through an incredibly tough time. But what we know
now is that for the first time in a long while,
we're now forecasting a consolidated period of growth, a sustained
period from growth, and that upturn has been a long
time coming, but it is now happening. And that means

(05:48):
that businesses and households are expected to be investing and
spending more, that we are expecting the economy to be growing. Now.
I want to drive that harder. I'm not happy with
just saying, oh, well, there's going to be a sick
look return. That's why the government's driving our agenda of
doing things like fast track legislation to get development and
progress underway. That's why we're fixing the basics in our schools.

(06:11):
It's why we are taking new approaches to infrastructure investment,
getting sensible about overseas investment, because all of those things
cumulatively improve the productive capacity of our economy and that's
actually where more income comes from. That's where more opportunities
come from.

Speaker 1 (06:27):
Minister, thank you very much for your time. That is
the Finance Minister Nicola Willis on the HAIFU results that
have come out today in the Budget Policy statement. For
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