Stubborn Robertson running out of other people’s money

“Finance Minister Grant Robertson is running out of options as he runs out of other people’s money. The Reserve Bank’s November Monetary Policy Statement forecasted conditions much worse than its own August Statement. When Treasury issues the Half Year Economic and Fiscal Update in ten days’ time, Robertson’s reality will be home to roost,” says ACT Leader David Seymour.

“Robertson this morning told Q&A there would be no more cost-of-living payments, instead saying he might extend the petrol excise tax, road user charge and public transport discounts. ACT predicts that when the HYEFU comes out he’ll struggle to do even that.

“The truth is that Robertson has borrowed, spent and printed his way through COVID but those strategies are temporary and have consequences called debt and inflation. Over the next year we are going to see those consequences, as the Reserve Bank is already predicting.

“The Bank’s Monetary Policy Statement, issued on November 23 predicts significantly less growth, higher inflation, and higher interest rates than its August Statement three months ago. ACT predicts that Treasury’s HYEFU, issued seven months after its Budget Economic and Fiscal Update, will show a similar deterioration.

“Despite these mounting challenges, Robertson refuses to admit he’s got it wrong and wants to plough on smiling as the economy crashes down around him. When I asked him:

‘Does the Minister of Finance accept that the problem with inflation is now much worse than anticipated, say, six months ago, and if so, what changes in policy is the Minister prepared to make that he hadn't announced six months ago?’

He could only reply:

‘It's certainly true that the forecasts around inflation have been worse now than they have in the past. The member will also be aware that we are heading towards a Budget where our percentage of spending as a GDP will continue to go down.’

“Treasury forecasts spending to be 32 per cent of GDP, down from 35, when he inherited spending at 28. Robertson’s problem is that as the economic conditions worsen, he’ll have to spend even more than that as economic conditions worsen further.

“We have a Finance Minister who is running out of options, he should be asking what expenditure can be delayed. As ACT called for on the day of the Monetary Policy Statement, the Government should put a moratorium on expenditures that are not urgent. Below are five Government projects that are not time sensitive (and ACT questions at any time), but a nonetheless increasing demand and driving costs:

1. The Three Waters merger is costing the Crown hundreds of billions to simply reorganise a sector. That is inflationary spending that produces no tangible outcome today, it should be paused at the very least.
2. The firearms register is slated to cost $200 million; it will make nobody safer. At best, some criminal will steal a gun and grind the serial number off it so nobody can prove they stole it off the person who registered it. At worst the register will leak and become a steal to order list for a gang. It should be paused to save money.
3. The RNZ-TVNZ merger is slated to cost $350 million, but nobody in the business understands its purpose. Willie Jackson says he knows, but his answers change day-to-day. It should be paused to save money.
4. The Auckland Light Rail project was supposed to be underway by 2021. It is still not clear what the purpose of the project is or why it is being done.
5. Kainga Ora just asked for $2.75 billion so they can compete with the private sector to build homes. There is no logic to this in a resource-constrained market. It is only driving inflation. Kainga Ora should stop any new home building or purchasing, it is simply driving inflation.

“The Government should go further and reduce spending across the board to give tax relief to struggling households, as set out in ACT’s Alternative Budget for Real Change.”

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