Brad Olsen: Infometrics Principal Economist talks Budget 2025 and whether the government can get back to surplus

A view suggests says yesterday's Budget is highlighting New Zealand's fiscal realities.

It found more than 21-billion dollars in savings - including nearly 13-billion from its pay equity changes.

Despite the many cuts - the Government isn't forecasting New Zealand to return to a surplus until 2029.

Infometrics Principal Economist Brad Olsen told Mike Hosking reaching that will be touch and go.

He says the next few Budgets are likely to be the same, and it will probably get harder to reach that target -- meaning less spending, or something else, may be required.

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Episode Transcript

Speaker 1 (00:00):
So budget twenty five the government, it turned out, did
have a lot of money, and that came from savings,
half of them from the pay equity adjustments, the rest
from adjustments to key we save a best start and
benefit cuts informetrics principle. Economist Brad Olson's back with this, Bradley,
good morning.

Speaker 2 (00:12):
Good morning.

Speaker 1 (00:13):
Do tell me this means testing thing that they're doing
in various ways, shapes and sizes. Whenever I've asked a
government previously why they don't do it for doctors and
kids and stuff like that, they've always said it's too hard.
Is it suddenly not too hard and we can mean
to test people?

Speaker 2 (00:29):
Well, I think it's probably an element of that where
it now becomes politically expedient enough to do it. I mean,
you look at the likes of the changes to the
eighteen to nineteen year olds. If you can means test
that age group when they go to university, when they
try and get a student allowance and similar it shouldn't
be too much harder to do it for the unemployment benefit.
So there's part there was interesting though, looking through some

(00:51):
of the budget documents that the government is also expecting
further savings over time from having better data thinking between
the likes of MSD an IID to effectively do that
means testing much more efficiently. So I do think that
over time, as the government is getting better and better
with its data, it's able to better and better do
that means testing without all of these big inefficiencies that

(01:12):
might have previously been there. So a little bit of
an advancement over time, a little bit of a political
shift as well.

Speaker 1 (01:18):
I think the deficit surplus by twenty nine and how
you measure it, which way do you favor measuring? And
are the government cooking the books?

Speaker 2 (01:27):
No, they're not cooking the books, So you can definitely
come up with the various measures regardless of how you
do it. The government is on track for a surplus.
It's going to be pretty touch and go. And I
think that highlights the fist realities right that we are
still for a while going to be living beyond our means.
The government is still seeing expenses that are above thirty
one percent of GDP all the way out until twenty

(01:49):
twenty nine. So look at it on the overgal measure,
look at it on the overgal mix x measure. They're
all trending towards the same point, But I think it
does highlight the look for the government. This is now
you know, I think probably the third, maybe fourth year
in a row, that that budget gets a whole lot
harder to return to surplus. So long story short, for
every budget into the future, for the next couple they

(02:10):
will do the exact same thing. It will probably get
harder to achieve that target. Something will have to give
and that means probably less spending or something else coming
along the way.

Speaker 1 (02:18):
The debt to GDP Does that worry you?

Speaker 2 (02:23):
I think it's concerning to see it remaining so high
for so long. I can understand that it's difficult to
get that down without making some incredibly much deeper cuts
than we've already seen. And this is you know, a
debate that's been playing out, I think this week between
the government and the opposition around debt levels. If something
hits tomorrow, if you have the Alpine fault that goes,

(02:44):
if you have another major weather event and similar that's
where the debt room is important because it helps us
get through. Treasury recently estimated that after a big economic
shop we spend something like ten percent of GDP on
that recovery. We've got to have that buff ahead room.
As much as it is important that we invest in
the future and let's get that right particular infrastructure, we've

(03:05):
got to have a bit of buffer too.

Speaker 1 (03:07):
Okay, bradon good insight, appreciate it as always. Brand of
Wilson Infometric principal economists with us for more from the
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