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Budget 2021: ANZ's chief economist says Govt has 'options' with spending

The chief economist at the country's largest trading bank says the Government has "options" when it comes to this year's Budget. 

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The bank’s chief economist Sharon Zollner expects “quite a lot of money” will be thrown at housing and the health system this year. Source: Breakfast

ANZ's Sharon Zollner told Breakfast with the books in better shape than expected, it meant the Government had options when it came to its future spending. 

"Government's love to have options and a bit more cash than they thought," she said. 

"The economy has rebounded much more aggresssively than anyone thought, partly if not largely due to fiscal stimulus."

Zollner explained although the books had taken a hit due to Covid-19, less money spent on taxes and more tax revenue brought in meant the Government had more money than it expected back in November. 

Given it faced a choice on whether to spend this extra money or save it, Zollner thought the Government would probably choose a bit of both. 

She also expected the Government to throw "quite a lot of money" at the health system in this budget, along with housing as it was a "time old" and one of the "simplest" solutions.

The Government putting more money into emergency housing was "clearly going to have to continue", Zollner said, although this was a band aid solution.

"The ultimate solution has to be more housing supply, but given our construction sector is flat out and increasingly stressed we have to be realistic about how long that's going to take."

Zollner also expected money in the Budget to be directed at the health system, as it was barely coping at the moment with no Covid-19 and no flu. 

However, she warned the market was already starting to conclude interest rates would not be able to be kept this low for long. 

Zollner said costs were going up on all fronts and firms were likely to pass this through. 

"A lot of inflation is coming."

Zollner also remarked there had been a very close relationship between monetary and fiscal policy in the last months, and although both had "succeeded beyond anyone's wildest dreams", this had been for good and ill.

"Both work by increasing debt."