Brad Olsen: Infometrics Principal Economist on the latest stats revealing Government spending has dropped

Treasury has revealed the state of the Government’s finances, and it's been revealed that spending has dropped.

The country's still in an operating deficit of $9.3 billion, but tax take has gone up and growth in total expenses has slowed.

Infometrics principal economist Brad Olsen unpacks what's behind this recent data.

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Episode Transcript

Speaker 1 (00:00):
Now the government's financial statements are out and it's not
looking that great. Debt is now at forty one point
eight percent of GDP. It's gone up in the last
year obviously. The operating deficit obergal X is sitting on
nine point three billion dollars. That's higher than last year's
which was eight point eight billion dollars. Revenue is up,
expenses up. Of course, Finance Minister Nicola Willis managed to
spin it in a good light health.

Speaker 2 (00:21):
And education, but as a proportion of the overall economy,
Crown spending is reducing.

Speaker 1 (00:26):
Brad Olson is infometrics principle economist and with us hih
Brad good evening. Obviously not great, But how much of
this should we give them slack fall because of the
state of the economy.

Speaker 2 (00:36):
Well, I think more than that, just the state of
the economy. The challenges is that a lot of these
numbers were baked in by previous decisions, and unless you
were going to see some really really fundamental changes, and
that would probably have to affect the likes of, you know,
different welfare and social spending, health and education, you probably
couldn't do too much of a turnaround job too quickly.
So the fact that some of these indicators have either

(00:59):
stabilized or to move slightly in the right direction. Yes,
it's not enough yet, but some of them. I mean,
you look at the likes of spending now a smaller
percentage of GDP. You mentioned the debt figure up six
point seven billion dollars from last year, but three point
five billion lower than was forecast in the budget, and
the fact that it stabilized at forty one point eight percent.

(01:20):
The first change, and it will first part of a
turnaround is at least leveling things out and stopping them
going higher. So I guess on that front there is
a bit of a change, but clearly there's still a long,
hard slog for the government books to get back into
a more reasonable position. That's probably going to take quite
a few years, until probably the twenty thirties.

Speaker 1 (01:38):
But why is the operating deficit still widening?

Speaker 2 (01:42):
Well, I mean the government is still spending more in
general than it's earning. If you look at the sort
of spending figures. Total revenue, so money earned by government
was up two point five billion from last year, spending
up three point four billion, But again a lot of
that coming down to the likes of social security and welfare.
That's both job seeker support. Because the economy is weak here,

(02:04):
you've got more people out of jobs, so that's sort
of cyclical. But of course you've also got those higher
superannuation payments. Like when you look through the numbers, those
are the areas that you see the biggest changes. What
the government has done, particularly around Kaying Aura has seen
a little bit less going through in the expense line,
so that's an important change. But at the same time,

(02:24):
there are then concerns in the community around social housing.
So all of this is a very delicate and very
difficult balancing act.

Speaker 1 (02:30):
I think, what is it We're supposed to hit surplus
in about four years and twenty twenty nine.

Speaker 2 (02:34):
Is that credible? Well, I mean it also depends on
exactly what you include or exclude from the various measures.
I mean it's sort of I think it's around twenty
thirty is sort of where my mind is sitting when
you look at the various indicators and realizing that's still
a long way away in terms of other economic shocks
that could come through and a whole lot of other changes.

(02:54):
So look, I think we are seeing that first shift
towards stabilizing things to bringing down a expenses as a
proportion of GDP. But it's still going to take a
while for those numbers to get back into what we
might feel as a sort of comfortable and sustainable zone.
Let's remember the reason we need to get the government
accounts back into a more sort of sensible order is

(03:14):
that the next time something comes out of the blue
and hits the economy, we need to have buffer room
to respond. And at the moment we're still trying to
pay off the credit card bill from the last couple
of times we've wrapped it up.

Speaker 1 (03:25):
Hey, listen, what do you make of the OCR announcement
yesterday with the double cut. Do you think that that
is enough to get our spending again?

Speaker 2 (03:33):
Well, in a sense, I mean the proof will be
in the pudding, but not for another twelve months. I mean,
those decisions that were made yesterday still won't flow through
to the economy fully. Brad, it was for a while.

Speaker 1 (03:42):
No, But Brad, it was supposed to be a head change,
a game changer in our heads. Right, We're supposed to
stop being scared, stop saving, and start spending effective. Now
is that going to work?

Speaker 2 (03:52):
Well, that's the talk, But That's why I'm a little
bit sort of, I guess, curious, and a little bit
there's a part in the bottom of my stomach here
that still worries that if we've got, you know, three
hundred or so basis points of cuts and that hasn't
done anything, but we're waiting for just that extra little
cut to get us over the line. I worry that
when inflation is nearly at three percent and similar, by goodness,
we could look back at this decision in a year's

(04:14):
time ago, we might have overdone it. I get the
call for stimulus and support, but that inflation worry, It
really does sort of stick in the back of my
throat and it worries me that will be there in
a year's time and still concerned.

Speaker 1 (04:26):
Yeah, hey, thanks very much.

Speaker 2 (04:27):
Brad.

Speaker 1 (04:27):
Always appreciated this, Brad awesome informetrics principle Economist.

Speaker 2 (04:30):
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