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The pre-election opening of the books read a bit like a Mills and Boon romantic fiction novel, and, in terms of not being able to confidently make predictions, they are to a degree, fiction. However, what predictions there might be were certainly not romantic. There is no doubt that a certain amount of massaging took place to make things look more like a bed of roses than a garden full of noxious weeds – you know, trying to make a silk purse out of a sow’s ear.
Writing on Stuff on Sunday, Damien Grant said that, under Robertson, our debt-to-GDP ratio was out of control. Prudent fiscal management was unpopular, so Robertson fudged the numbers. Rather than taking the total level of government debt, compared to the size of the economy, Robertson instructed the Treasury to take the total level of debt, less the capital in the Cullen Fund, and use that to work out the debt-to-GDP ratio, which according to Grant, is nonsense. He says if you want to include the Super Fund in the analysis, you should also include the liabilities for national super in the government debt column. The hard cold facts of the matter are that Robertson has been spending like a drunken sailor and a fair amount of the inflation is domestically driven.
I have just watched the Luxon-Willis presser discussing the Pre-Election Economic and Fiscal Update (PREFU). Both were very impressive, which is more than can be said for the journalists. In the journos’ inane attempts to trip them up, they asked questions in such a way that they hoped the answers would put their friends in Labour in a positive light. If some didn’t get the reply they wanted, they asked the same question again and, of course, got the same answer. I’m sure Luxon and Willis stuck it out solely for the opportunity of continually slapping them down.
The most optimistic figures in the PREFU will only come to pass if the government sticks to them. That is most unlikely, as the last six years have shown. The present government goes to the electorate each time sounding and acting as if they’re the most fiscally responsible government this country’s ever had. As we know, the opposite is the case. Robertson and Hipkins are trying to tell us the economy is in good shape and we’ve turned a corner. Luxon and Willis are correctly at odds with that and gave the journos at the presser plenty of reasons why.
Figures released recently show we are second to last in the OECD for economic growth and last globally for debt-to-GDP. The positives in the PREFU are more than outweighed by the negatives. There is precious little good news in it for Labour, despite Robertson fiddling the books. Higher inflation, possibly higher mortgage rates and more debt are predicted.
If Labour wants to know the principal reason they will get thrashed at the upcoming election, they need to find the door with the name Grant Robertson on it. No doubt they think he’s been amazing and so won’t bother to look. People expect their government, even allowing for Covid, to do a far better job. Grant’s performance, maxing out the credit card, is precisely why National are generally considered better managers of the economy.
National will face the usual Labour ‘Old Mother Hubbard’ trick of finding the cupboard bare. National is saying, allowing for that and the figures in the PREFU, they can implement their policies including tax cuts without extra borrowing. This is what has the comedians, otherwise known as journalists, so mystified. Listening to Luxon and Willis, there is supreme confidence that it can be done.
The first three years of a National/ACT government are going to be very revealing in terms of how correct their economic assumptions are. Let’s hope they’re on target.
