The Prime Minister is standing by government spending, despite the part it may be playing in driving up inflation and interest rates.
Economists are now firmly divided on whether the Reserve Bank should keep the Official Cash Rate unchanged at 5.25 percent tomorrow, or raise it by a further 25 or 50 basis points.
But most economists now expect the OCR to peak higher than expected, due to the inflationary pressure of last week's budget.
Chris Hipkins told Mike Hosking much of that increased spending is unavoidable.
"We have a cyclone recovery to pay for and it will have a significant impact on the Government. We've seen salary and wage pressure in the number of public sector workers dissatisfied with their pay cheques at the moment."
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