Nicola Willis: Finance Minister on treasury report calculating the total cost of the pandemic at $66 billion

The Government says it won't make the same mistakes as the last if hit with an event similar to the Covid-19 pandemic. 

A Treasury report has calculated the total cost of the pandemic at $66 billion. 

It puts New Zealand among the highest spenders as a proportion of GDP on the Covid response in advanced economies.

Finance Minister Nicola Willis told Ryan Bridge nearly half of the spending was on unnecessary initiatives. 

She says it didn't make a difference to the economy, and racked up huge amounts of debt.  

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Episode Transcript

Speaker 1 (00:00):
So Jasindra Doom was worn repeatedly along with Grant Robertson,
that his spending spree during COVID would have dire consequences,
and she was warned as early as twenty twenty. Newly
released documents, Showerdourn's own treasury advised that a blowout of
public debt would leave us vulnerable for any future crises,
and avoided advised her rather to better target the spending.

(00:20):
Nicola Witus is the Finance minister with me this morning. Minister,
good morning, good morning. First of all, does the government
have any response to what Netanya, who's just announced he
wants to fully take control.

Speaker 2 (00:31):
Of Gaza looks forgive me? I have not been briefed
on that, and I know very well on matters of foreignacys,
one should be brief before one comments.

Speaker 1 (00:41):
Fair Now this report from Treasury. Does this mean that
in future events you won't be doing what Labour did
and pulling the fiscal lever and leave it to the
Reserve Bank.

Speaker 2 (00:52):
That's exactly what it means. This is officials who have
looked very keyfully at what went on. They are not
political and what they make very clear in this report
very politely, is that big mistakes were made in the
way that the last government used government spending to respond
to COVID, and they are urging future politicians not to

(01:15):
repeat those mistakes, and our government will not.

Speaker 1 (01:19):
The vast bulk of that spending was on the wage subsidy.
Did you support that, Well.

Speaker 2 (01:24):
That's not actually correct. The wage subsidy was around thirty
five percent of spending. Hundred percent was eighteen percent was
helf That's here's the kicker. Nearly half of a COVID
spending was on a range of things with a very
varied range of objectives, whether that was school lunches, increases

(01:45):
to welfare benefits, public housing. Now all good things that
we know that many people like. But actually what the
officials say is that didn't really make a difference to
the economy doing that stuff. Not a very LaGG defect,
and it racked up huge amounts of debt. It was
extremely inflationary, and we're now in the position as a

(02:07):
country where we are paying the price for that. And
so the point is, Yep, you've got to do some things.
You've got to do wage subsidies, you've got to increase
your spending on the health system, but be really careful
that you do the things you have to do and
don't rack up so much extra spending and debt that
we end up as an economy paying it off for
a very long time. That's what the last government did.

Speaker 1 (02:28):
Yeah, but it's your continuing with it, aren't you. I mean,
the bureaucrat counts barely moved. You've still got massive government debt,
is still spending more than spending more than you are earning.

Speaker 2 (02:39):
Well, I reject that. Across our first two budgets, we
have already delivered forty four billion dollars worth of savings.
Now it is correct that we have put a lot
of those savings back into the system into education.

Speaker 1 (02:53):
Government's still just as big, right, No, it is not just.

Speaker 2 (02:57):
As big, because what we have had, well, we have
constrained government spending significantly. We've had much smaller editions of
additional funding, and we have ensured that we're in a
position where over the next four years we can get
the books back in balance. We've put that track down
that we get them back in balance and we start

(03:18):
bending down the deck curve.

Speaker 1 (03:19):
Yeah, but that's one the other. That's what Grant used
to tell us too. How much smaller is the government
now under your watch than it was under labor? I mean,
you keep saying they increased spending eighty four percent, blah
blah blah. How much smaller is government spending now than
it was?

Speaker 2 (03:33):
Well, government spending is on track to come down to
thirty point nine percent for context, the last government drove
it up to thirty four percent of the overall size
of the economy. And most importantly, what we've done is
ensured that when we've been making investments, we're doing them
in a way that actually stimulates growth in the private

(03:54):
sector of the economy, things like making sure we're reducing taxes,
making sure we've got that investment those schemes for businesses,
because we know the countries don't get rich just by
growing the size of their government. They have to grow
the size of those who are making things, misting things.

Speaker 1 (04:10):
Very doing things very quickly. We've got the tariffs coming
in today. Do we have when is Todd McClay going
to be over the Do we have any idea whether
they're going to give us a reprieve?

Speaker 2 (04:20):
Well, look, I think that those who observe Trump and
look internationally can see that that seems very unlikely at
the stage. Now that means that New Zealand needs to
keep pressing our case. We need to keep making sure
the a US administration remembers what a good partner they
have been to them. But look, I look at Switzerland.
They went over and did a huge amount of negotiating.

(04:41):
They thought they were going to be on a low tariff.
They ended up on thirty nine tea.

Speaker 1 (04:45):
Almost made careful, Almost made the situation where Nicola will
appreciate your time this morning Finance Mins.

Speaker 2 (04:51):
For more from early edition with Ryan Bridge. Listen live
to News Talks it'd be from five am weekdays, or
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