National’s finance spokesperson Paul Goldsmith has accused the Government of creating financial uncertainty, but Finance Minister Grant Robertson maintains Labour has the “balanced plan” New Zealand needs to recover economically following Covid-19.
Goldsmith said yesterday’s Pre-Election Economic and Fiscal Update (PREFU) showed a slight improvement on the dire forecast from the budget, but the longer-term forecast was “deeply worrying”.
“But what the books show is the recession is going to be longer and deeper than what the Government was letting on,” he told TVNZ1's Breakfast today.
“What we will see is more people being unemployed for a longer period of time. It’s deeply worrying.
“What it (PREFU) showed was the economy shrunk by 16 per cent in the second quarter. That’s more than twice as much as Australia (7 per cent) did.
“It showed that we could be losing another 100,000 jobs over the next two years and it also shows debt ballooning out over the next few years, deficits as far as the eye can see.”
Robertson, appearing on Breakfast immediately after Goldsmith, wasn’t sugar coating the global pandemic-induced recession, but said Government initiatives had cushioned the blow thus far.
“In our lifetime, this is going to be the most significant hit on the New Zealand economy,” he said.
“The initiatives that we had like the wage subsidy scheme have knocked the edges off that, cushioned the blow.
“Covid-19 is going to affect the economy and all of our lives for a considerable period of time to come.”
Goldsmith said a National Government would create economic conditions for job creation, with a fiscal policy that the party is set to announce tomorrow, and allow New Zealand to recover more quickly.
“It’s about creating the conditions for jobs to be created, to get on top of the debt, to keep taxes low and give New Zealanders a chance to get cracking again,” Goldsmith said.
“No question that NZ will get back on its feet - the question is how quickly? Our view, of course, is that with National’s policies we’ll get back on our feet quicker.”
Labour's primary option for job creation was to buy them, using borrowed money, as part of Government schemes, according to Goldsmith.
“Compared with us [National], who are prepared to accept that there is a role for Government investment, particularly in real quality infrastructure, but the real secret is to drive private sector investment.
“That requires confidence. It’s about keeping taxes low, pushing back the tide of regulation…and also disciplined day-to-day spending.
“It’s quite important that we get the debt down again eventually to prepare for the next crisis.
“What we’re seeing at the moment is a huge amount of uncertainty being created by the Government. Obviously, we can’t control the uncertainty of Covid-19…but we can control what we’re doing here.”
Yesterday's report showed that debt increased from $25.7 billion to $83.4 billion, about 27.6 per cent of GDP at June 30, 2020.
Robertson said increasing debt was what the Government had to do to save lives and livelihoods, but the “good news” was that Aotearoa had started with lower levels of debt.
“I copped a lot of grief in my first couple of years as Finance Minister for focussing on keeping that debt low, keeping it under 20 per cent of GDP. That means we can now borrow and still, at the end of all of this, have one of the lowest levels of debt in the world.
“That doesn’t mean we can be complacent. We’ve got to be careful with our spending. We’ve got to make sure that grow the economy.”
Robertson denied that Labour needs to increase taxes if it is elected for a second term, despite its tax policy raising just $500 million a year.
“No, it’s got to be a balanced plan. The revenue policy can play a part,” he said.
“The biggest thing we can do is sustainably grow the economy by investing in our businesses, by supporting the building of housing and infrastructure – and by being careful with our spending.
“Looking for a silver bullet in these situations never works. It’s about a balanced plan and I think that’s the one that we’ve put out there.”
Robertson said the Government was also looking to have a trans-Tasman bubble set up by the middle of next year to boost NZ’s economic recovery.
“You know we’ve been working on bringing in more people who’ve got economic skills that we need, and we’ve promised to dedicate a percentage of our managed isolation places to that.
“And we’ve been working on that trans-Tasman bubble as soon as both sides of the Tasman are ready for it.
“We’re looking for that [trans-Tasman bubble] in the middle of next year. Obviously the development of a vaccine is absolutely crucial to the full opening of the borders.
“No one can give you a specific date [on any bubbles], but we’re going to move as quickly and as safely as we can.”