Social investment from Budget 2019 will come at a fiscal loss says top economist

Economist Cameron Bagrie has mixed views on the impact of today’s wellbeing budget saying the social investment will come at a cost and has expressed concerns over how the economy will look over the next two-three years.

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Mr Bagrie says the Government won’t be hitting fiscal targets in five years’ time. Source: 1 NEWS

Calling the Budget a "game of two halves", Mr Bagrie told 1 NEWS said there will be lower surpluses and rising debt over the next few years.

He says while there may be a "fiscal diet" coming up, making the numbers look good, his concern is that in five years’ time, the Government will not hit its fiscal targets.

"If I have a look at the last 12 months, spending is up about 8.5 to 9 per cent, it’s going to be up 6 to 7 per cent in the next 12 months, if we continue that sort of run-rate we are going to see a bit of pressure on the fiscal position.

"Is that going to be the end of the world? The answer is no. We have got world-class debt metrics, we can absorb a little bit of fiscal slippage – lower surpluses, they are still good numbers, they are not going to be as great," he says.

Mr Bagrie says the focus should be on the "quality of the spend" of which he says there is not enough debate over.

He says New Zealand needs to "get on top" of its social deficits but the issue is whether there will still be economic growth.

"I have a few concerns about where the economy is going to be over the next two-three years," he says.

"The growth transformational plan is a little bit light but I do like the social investment we are undertaking."