Who would have thought that austerity would stuff up the economy

Written By: - Date published: 1:48 pm, December 18th, 2024 - 6 comments
Categories: economy, national, nicola willis, treasury - Tags:

The HYEFU has been released and the results are pretty ugly.

There is a big dent in the tax take with tax revenue estimated to be down $13 billion over a four period. Who would have guessed that putting the handbrake on construction and infrastructure projects and culling tens of thousands of public service jobs could have resulted in this?

And borrowing for tax cuts for landlords will mean that core crown debt will go up. And I thought these cuts were meant to be fiscally neutral.

The return to surplus has been put off by a couple of years.

And the Government is trying to skewer the statistics by excluding anticipated increases in ACC liabilities from the calculation of the OBEGAL which shall from now be known as the OBEGALx. It will remove ACC deficits from the calculation and make the figures better.

Treasury has opposed the move and the opposition have accused her of creative accounting.

From Radio New Zealand:

“She’s adopting a measure entirely of her own creation in order to try and make the deteriorating financial situation that she has created look less bad than it is,” Labour leader Chris Hipkins said.

“This appears to be an attempt at creative accounting, to make things appear better than they are, in terms of what the government’s exploring there,” said Green Party co-leader Chlöe Swarbrick.

Labour’s Barbara Edmonds has pointed out that overseas the experience is that Austerity does not improve GDP growth.

From Radio New Zealand:

“If you have a look at the budget policy statement, it continues to say there will be more spending cuts and there will be more to come in the future,” she told Morning Report.

“So, she’s only left $700 million available at her next budget to pay for everything outside of health.”

Edmonds doubled down on her claim it is an example of austerity, and pointed to previous governments’ debt trajectory.

“Not just Labour the last term, but you look at National, the government borrowed for crisis, for the GFC, for the Canterbury rebuild, for Covid, that’s why governments have borrowed, she said.

“This government has borrowed for tax cuts, interests deductibility, tobacco tax breaks.”

Instead, Edmonds wants to see continue investment house building programmes, hospital upgrades, and infrastructure, instead of borrowing for tax cuts.

Meanwhile Nicola Willis Willis has promised more austerity. The beatings will continue until morale improves.

She is also yet again trying to blame the last Government.

Which is really odd because the deterioration is from her budget figures presented earlier this year.

This shows yet again that the right are appalling managers of the economy. Even if they think that they can do no wrong.

6 comments on “Who would have thought that austerity would stuff up the economy ”

  1. SPC 1
    18 December 2024 at 3:45 pm

    AbigailX, sounds like a dancers private address.

    We certainly need a sugar plum fairy, rather than the continued trashing of the public service, the wider economy and the misallocation of resources.

    ACC contributed $4.1b to the obegal deficit in the past year – a third of the total. Treasury reckons if Crown Entities were excluded, the obegal would be better off by about $4.6b a year.

    Willis told a select committee this month to expect an update at the HYEFU. If the metric is changed, expect the Opposition to attack the Government for “shifting the goalposts” to make hitting a surplus easier (Treasury was against the idea when it was floated in 2021).

    https://archive.li/knqln#selection-3959.0-4018.1

    Her excuse

    This is to avoid incentivising unnecessary and unhelpful short-term decision making.

    “Ministers should not be raising taxes or reducing public spending to compensate for ACC deficits in pursuit of a short-term surplus target.

    https://www.beehive.govt.nz/release/financial-measure-and-capital-allowance-updated

    Of course it is her own Captain Ahab like obsession with getting to a budget surplus (and using the wrong approach), that is the reason why she removed the item from the books.

    Reply
    • SPC 1.1
      18 December 2024 at 4:04 pm

      Treasury speak

      2021, against the idea because the ACC deficit placed constraint on the government spending level.

      2024, for the idea, as Willis does not understand Keynesian economics and needs to be helped to get to the budget balance before she does too much damage.

      Reply
      • adam 1.1.1
        18 December 2024 at 4:07 pm

        needs to be helped to get to the budget balance before she does too much damage.

        A bit bloody late mate – this will be years of damage.

        Reply
  2. SPC 2
    18 December 2024 at 3:48 pm

    The other change could be the end of the multi-year capital allowance (MYCA). This was a tool created under the last Labour Government to reflect the fact that capital spending is often lumpy and it made little sense to allocate annual capital funding when rolling, multi-year funding would better reflect how this money was spent.

    Willis argued that in practice, the allowance was topped up by large amounts each year and often depleted, fuelling “gross amounts of spending”. She suggested in Parliament last week that it was not long for this world.

    Allowances tend to be signalled at the BPS so if the MYCA were to be scrapped, this would be a logical place for it. Labour may attack the change as an attempt to reduce capital spending on infrastructure in a bid to get on top of borrowing.

    Accurate, Willis now talks of infrastructure done cheaper (as per the Dunedin hospital etc).

    Again from

    https://archive.li/knqln#selection-3959.0-4018.1

    Reply
    • SPC 2.1
      18 December 2024 at 4:13 pm

      The reason for the multi-year capital allowances was to synch the process with the 5 yearly reviews

      Infracom will work with central and local government, the private sector, iwi and other stakeholders, and develop a 30-year infrastructure strategy that will replace the government's current 30-year plan.

      The first plan will be reported to government by the end of 2021 and thereafter at least every 5 years. The strategy will cover the ability of existing infrastructure to meet community expectations; current and future infrastructure needs and priorities; as well as any barriers which could impede the delivery of infrastructure or services arising from it.

      The Treasury now monitors the performance of Infracom and provides advice to Ministers on the Commission's long-term infrastructure strategy and its other recommendations.

      On 29 January 2020, the Prime Minister announced a $12 billion package of infrastructure investments to be known as the New Zealand Upgrade Programme. In its quarterly update of the infrastructure pipeline in March 2020, Infracom said that it had incorporated nearly $7 billion of New Zealand Upgrade programme projects, bringing the estimated total value of the works pipeline to $33.2 billion. 

      https://en.wikipedia.org/wiki/New_Zealand_Infrastructure_Commission

      Reply
  3. adam 3
    18 December 2024 at 4:05 pm

    Who would have thought that austerity would stuff up the economy

    Me, before the election.

    Open class warfare, the corporations need their greed feed and we are in the way.

    Reply

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