Cameron Bagrie: Independent economist on how the Finance Minister will deliver on her budget with a tiny operating allowance

The Government’s halfling their operating allowance in the budget out at the end of May.

They say they have freed up “billions” in additional public service cuts to allocate more money into the country’s “most pressing priorities.”

Economist Cameron Bagrie talks to Heather du Plessis-Allan about the announcement.

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Episode Transcript

Speaker 1 (00:00):
Finance Minister Nicola Willis has certainly raised eyebrows today announcing
that she's going to slash her own operating allowance for
this year's budget to a ten year low of just
one point three billion dollars. She's virtually halved what she's
given herself to play with, and the last time it
was this low was in twenty fifteen, when Bill English
only gave himself a billion dollars. Now, independent economist Cameron
Baggery's been looking at this and he's with us Hey

(00:20):
can evening hit. Did it raise your eyebrows?

Speaker 2 (00:25):
Yeah? Yes, yeah, in my mind, the real number is
not one point three. The real number looks to be
close to zero. Yeah, because out of the two point
four that was the initial allocation, there was pre commitments
within last year's budget of about one point five billion. Yeah,
so they had about yeahero point seven point eight Bill.

Speaker 3 (00:46):
You're left to allocate. Yeah.

Speaker 2 (00:47):
So what we're effectively looking at in the twenty twenty
five budget for the time you cake, Yeah, the dedication
to health.

Speaker 3 (00:53):
Which I'll have to follow through on, it's a zero number. Yeah.

Speaker 1 (00:56):
Well, I mean if she's pre allocated one point five
and she's given herself one point three. Then she's in
deficit to the tune of about zero point two. Right,
So this would say that there are enormous cuts in
this budget, right well reallocations.

Speaker 2 (01:10):
But you know, to be fair, what we saw in
the twenty and twenty four budget was a bit of
the same. So if you actually have a look at
the gross cost of the twenty twenty four budget package
was an average of nine point one billion dollars per year,
but what they offered up was savings revue raising initiatives
of five point nine, so the net number was three
point two.

Speaker 3 (01:30):
You know, what we're going to.

Speaker 2 (01:31):
See again is that there'll be a pretty sizable budget
twenty and twenty five package in regard to who gets what,
but it's going to be funded differently. It's going to
be funded by spinning cuts, reallocations, productivity, and there'll be
some revenue initiatives in there.

Speaker 3 (01:46):
It's just a question who's giving what and who's getting what.

Speaker 1 (01:50):
Okay, So it sounds like means testing is at least possible.
What would she means test?

Speaker 2 (01:57):
Well, I guess the big the big five hundred pound
gorilla out there in New zeone that we need to
get a head around. Is the explosion we're already seeing
or we're going to continue to see in New Zeon superannuation. Now,
if you go back to twenty twenty, New Zeon superannuation
was fifteen point five billion, which is a pretty big

(02:17):
chunk of cash. It's prejected to be twenty eight point
eight billion by twenty twenty nine. We've got the New
Zealan's superannuation is indexed to wages. All the other benefits
are indexed to the consumer price intuation. Why is the
difference between the two. I can't get my head around that.
But we're starting to see the very strong effects of

(02:39):
the moment of the fiscal cost of an aging population,
and current fiscal settings are just not sustainable. So the
question is it, how are we going to change?

Speaker 3 (02:47):
What are we going to change?

Speaker 1 (02:48):
Okay, now, what she should do, to your mind is
different to what she is going to do. Do you
really think she's going to means test the pension.

Speaker 3 (02:57):
No, it's been murdered.

Speaker 2 (02:58):
As well about whether the retirement age it goes up.
There's very others mechanisms you could bring in, but yeah,
that that that portion of the population tends to be
a little bit more national party centric.

Speaker 3 (03:11):
It's one of the sort of hot potatoes.

Speaker 2 (03:13):
I'd like to see them take it on because I
think it's pretty obvious what the numbers are saying. It's
not sustainable. You know, if we're pouring a lot more
money into health than New Zealand superangulation is a share
of the economy, then other parts of the economy have
got to miss out, and then it becomes a simple
gain regardable who's going to miss out. And what we
know is that the minister you've gone on today's she

(03:35):
identified the obvious priorities, which is health, education, defense, law
and order. But yeah, just to keep some of those
them staff as a share of GDP is going to
require a pretty bigger uplift in spending. And if that
is a share of GDP, but government spending is going
to be overall going down as a share of GDP,
then you take it from Peter to pay Paul. There's

(03:56):
got to be some cuts on the other side, and
the issue is that where are those cuts on the
other side coming from.

Speaker 1 (04:00):
Yeah, that's a fair point. Hey, Cam, thanks very much,
really appreciate your expertise. That's Cam Bagri, Independent Economist for
more from Heather Duplessy Allen Drive.

Speaker 2 (04:08):
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