Labour-Greens have signed up to a joint position on surpluses, cutting debt
Labour and the Greens have agreed on a joint set of Budget rules, including a pledge to run surpluses and cap debt.
In a further move to reassure voters, the two-party Budget Responsibility Rules (BRRs) will be assessed by a watchdog independent of ministers that could also cost Opposition parties' promises.
But the move was immediately criticised by Labour's allies in the union movement, with Council of Trade Unions President Richard Wagstaff saying fixing problems in education, health, housing and other public services would test these rules.
"We support higher levels of Government activity and investment than these rules permit," he said.
But Business NZ welcomed the plan, saying it would be good to see more such deals.
Under the BRRS, unveiled at a business breakfast in Auckland on Friday. the parties agree to a range of fiscal controls including sustainable Budget surpluses and lowering net debt to 20 per cent of gross domestic product in five years.
But their time-frame would see them hit the 20 per cent target two years later than National.
Labour finance spokesman Grant Robertson said he needed the extra time to address the "major infrastructure deficit, such as in housing and transport".
Surpluses would be delivered "across an economic cycle" but he envisaged being in surplus every year unless there was a significant natural disaster or economic shock.
"From time to time you are faced with the difficulty of not maintaining a sustainable surplus and that's what that's a recognition of."
The independent watchdog would define the cycle, but it was normally five to eight years.
At the same time the parties pledge to keep spending within "the recent historical range". That averaged about 30 per cent of GDP but hit 34 per cent during the Global Financial Crisis.
"We are setting ourselves some disciplines here," Robertson said.
The settings were significantly tighter than Labour had imposed on itself at the last election.
Green finance spokesman and co-leader James Shaw said the parties wanted to show voters the shape of the next government.
He was happy with the end result, but could not name the hardest issue to agree on.
He did not believe it would be hard for the Greens to stay within the rules.
Other BRRs would prioritise investment with a long term focus, such as restarting contributions to the "Cullen" NZ Superannuation Fund and moves to reduce the impact of climate change.
On tax, where Labour and the Greens disagreed, they have pledge to "ensure a progressive taxation system that is fair, balanced and promotes long term sustainability and productivity of the economy".
Labour's policy includes setting up a working group after the election to look at the tax system but it would not campaign on any changes beyond those it has already announced..
"The major policy decisions ... will come from that working group, but we are not in a position at the moment to go any further," Robertson said.
Shaw said the Greens would campaign on tax changes similar to those it ran on at the last election.
But he wanted to see some tax reforms in the first term in Government.
Robertson, who would be the finance minister in a Labour-Green government, said the BRRs set a "framework" and the parties would have different policies within that.
"People will vote and make their judgment on those policies but the framework is a higher level document than individual policies."
He said he was proud of the party's record on fiscal responsibility but this was a chance to show the public it was "serious about it again, and we are so serious we are setting rules and have an independent accountability mechanism for that".
Details of the independent watchdog were still being finalised, but it would not be within Treasury. It could be set up as a separate commission or as an Officer of Parliament.
Robertson said other parties could agree to have their policies costed, though Shaw said "ideally" it would cost all party policies.
But both said the major parties' would be under pressure to agree or face a public backlash.
The Greens last year proposed an independent "policy costings unit" within Treasury to give voters an unbiased take on party policies.
Shaw said this was "child of policy costing unit" but went a step further because it could assess how the Government was tracking.
The Labour-Green Budget Responsibility Rules:
1. The Government will deliver a sustainable operating surplus across an economic cycle.
2. The Government will reduce the level of net core Crown debt to 20 per cent of GDP within five years of taking office.
3. The Government will prioritise investments to address the long term financial and sustainability challenges facing New Zealand.
4. The Government will take a prudent approach to ensure expenditure is phased, controlled and directed to maximise its benefits. The Government will maintain its expenditure to within the recent historical range of spending to GDP ratio.
5. The Government will ensure a progressive taxation system that is fair, balanced, and promotes the long term sustainability and productivity of the economy.