Maybe 2025 didn’t go quite the way we all hoped. Those who hung onto the mantra ‘survive til 2025’ had to update it to ‘survive through 2025’. Now, it turns out, we are going to have to hang on a bit longer.
We know this because Treasury published its Half Yearly Economic and Financial Update just in time for Christmas. In a nutshell, says the report, GDP growth will be lower and unemployment higher than forecast. As a result, the Government’s tax revenue will be down, and the longed-for return to surplus delayed until 2029/30.
In its November Monetary Policy Statement, the Reserve Bank told us what many of us already knew: the ‘job-finding rate’ is the lowest in 30 years.
Over these holiday days, there will be thousands of parents making zoom calls to rangatahi overseas – new economic migrants from a country which can no longer find jobs for them.
Data from the last two years reveals the government has pulled billions of dollars of investment spending out of the economy, in a recession. One estimate puts total cuts in capital government spending at $10 billion.
If you or I were heading into tough times, it might well be a good idea to cut our spending, depending on the circumstances. For a government to cut spending while heading into a recession inevitably leads to a lower tax take, more spending cuts and a harsher, longer recession as the government struggles to make increasingly unrealistic targets.
This is the Coalition’s grim feedback loop, and it has been playing out since the last election.
Those who are paying for these cuts, of course, are the ones who can least afford it. Health Minister Simeon Brown wants to cut half a billion dollars from Health New Zealand’s current budget and ‘reinvest’ it.
Labour health spokesperson Ayesha Verrall suspects these will turn out to be “substantial cuts to important resources in a health system” that is already chronically underfunded.
“The minister needs to be more transparent about this. The idea that he is generating half a billion dollars off the budget and then reinvesting it without a plan that is publicly available is suspicious. I think they need to be more transparent. That’s a massive amount of money.”
Sick people, she might have added, don’t generate much tax. Underfunding public health, primary, emergency and preventative care is one of the most callous and counterproductive things a government can do in a recession.
Meanwhile, New Zealanders grapple with a punishing level of household debt compared to other nations, a debt level which is proving decisive. “In my view,” writes economics analyst Bernard Hickey, “the Government’s strategy isn’t working because households simply can’t take on much more debt, banks don’t have much spare capital to generate lending at double-digit rates, and landlords can’t borrow quickly in the face of falling rents and DTI (debt-to-income) limits.”
If you feel like you are being squeezed until your pips squeak, you are. But, it’s election year, and so, from under a pile of economic lemons, the sixth National Government is busily making sweet lemonade – in the form of upbeat press releases about the economy.
The left, in a bizarre side show, aren’t the only ones who think our Minister of Finance is struggling badly. The Taxpayers’ Union, a libertarian group led by infamous former National Party finance minister Ruth Richardson, is campaigning against her. Richardson’s name is synonymous with the deep benefit cuts and ‘free-market reforms’ collectively known as ‘Ruthanasia’.
These days, Richardson would like everyone to know that the problem with our economy is all that unnecessary social spending. That’s right – she thinks the government that cancelled pay equity for over 150,000 women, laid off thousands of public servants and cut subsidies to food banks has been too generous.
This is too much even for the harried Nicola Willis, trying to project, from underneath the lemon pile, a portrait of calm serenity – of expertise. Her message is ‘everything’s fine’.
“With fresh air in its lungs”, she insisted in December, “the economy is picking up.” It was an oddly chosen metaphor, in the circumstances. Her government’s environmental and climate obstructionism won’t be doing much for air quality.
And our economy needs much more than fresh air this year.
• Jenny Nicholls
© Waiheke Gulf News Ltd 2025
