Finance Minister Grant Robertson says Government will spend more on health, climate change as he sets out new debt cap in first pre-Budget speech

STUFF
The Government will use a new measure of debt that is more comprehensive and better compares to that of other nations, Grant Robertson says.

The Government is preparing to spend more on health and climate change over the next year, Finance Minister Grant Robertson signalled as he previewed this month’s Budget.

The Budget will also see the Government introduce a borrowing limit as the pandemic and its effects continue to cause economic shocks around the world including rising inflation rates and an increasing cost of living.

“I have been really clear that the Budget’s focus is around the health reforms and around climate change,” Robertson said as he outlined the plans during his first major pre-Budget speech in central Wellington on Tuesday.

Robertson set out new fiscal rules including a new debt measure and debt cap as the Government looks ahead to post-pandemic economic recovery. The new debt measure follows a recommendation from Treasury to include Government assets such as the Super Fund and liabilities.

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“It is a much more accurate picture of our financial position,” Robertson said as he outlined the plans during his first major pre-Budget speech in central Wellington on Tuesday.

The new debt ceiling will be 30% of GDP under the new system.

“While this rule gives us comparably low level of net debt, it will provide fiscal space to fund high-quality capital investments that improve productivity and wellbeing,” he said.

Finance Minister Grant Robertson will make a speech at Rabobank on Tuesday. (File photo)
ROBERT KITCHIN/Stuff
Finance Minister Grant Robertson will make a speech at Rabobank on Tuesday. (File photo)

Surpluses will also be kept within a band of 0% to 2% of GDP to ensure new day-to-day spending is not added to debt. The Government could meet surplus by mid-2025, he said.

“It is important we return to surplus in a measured and balanced way...that gives us the best ability to address that key challenge of closing New Zealand's infrastructure gap.”

The IMF forecasts Government net debt to reduce from 21.3% of GDP in 2023 to 16.4% in 2027.

Robertson’s speech foreshadows the May 19 Budget announcement where he will outline the Government’s spending plans over the next four years amid a high inflation rate, and while costs for everyday items rise.

National Party leader Christopher Luxon on Monday blamed Government spending for the high inflation rate, dubbing higher food and fuel prices a “cost of living crisis”. Part of National’s tax policy includes tax cuts, but Labour says this mostly benefits the wealthy.

Core Crown expenses in 2021 were $107.8bn while this year’s was forecast to be $128bn.

Some economists have said the high cost of living is partly down to international factors – like the war in Ukraine and pandemic-related disruptions to global supply chains – but that less than half of the drivers are domestic, such as low unemployment.

However, they warn the high cost of living won’t be coming down in the coming months.

Robertson in a December Budget policy statement said this year’s Budget would focus on the health reforms and investment to meet climate change goals.