Robertson says govt will cancel tax cuts, slow debt repayment to fund policies - details in Dec. 14 HYEFU

Friday 1st December 2017

The government will cancel the previous administration's tax cuts, slow debt repayment and weed out low-priority spending to fund its policies, with the details to be set out in the Dec. 14 Budget update, says Finance Minister Grant Robertson.

He told an ANZ Breakfast in Auckland that by reversing National's tax cuts, which were to kick in next April, the coalition government will create "$8 billion of fiscal headroom over the forecast period." That would "more-than meet the costs of the 100 Day Plan and provide further resources to invest in Budget 2018 and beyond," he said in speech notes for the address.

The government would also slow debt repayments, aiming to reduce net core Crown debt to 20 percent of gross domestic product within five years. That was among Labour's policy pledges in its election campaign and pushes the target out to 2022 compared with National's target of 2020. Robertson said the government's commitments have yet to be finalised as part of the normal Budget process. He also flagged the use of infrastructure bonds to fund key infrastructure developments.

"We will, however be providing the current estimates of the costs of the policies in the coalition and confidence and supply agreements at the time of the release of the Budget Policy Statement," he said.

The high-level speech is short on detailed costings but Robertson indicated he is taking an all-of-government approach to finding the funding. He had told all ministers "to assess their budgets against the new government’s priorities. If programmes are found that do not match these priorities then ministers should consider whether this funding can be re-invested in new, higher priority areas which match our strategy. This work is already underway and will contribute to Budget 2018 planning."

Robertson said he wanted to move away from using GDP alone as a measure of New Zealand's success. While economic growth has been relatively impressive "it tells us only a fraction of the story. Firstly, it is a measure of activity, not the quality of that activity. And secondly, on a per capita basis, our performance has been significantly less impressive than many of our OECD counterparts."

A broader framework was still being developed but would include core elements of lifting living standards and well-being. Those changes wouldn't be made in time for Budget 2018 but he planned to give more details at that time. Goals such as reducing child poverty would require amendment of the Public Finance Act, he said.

"Success for us will mean more than just a strong balance sheet - as important as that is," he said. "It will be marked by how we improve the well-being of all our citizens."

Repealing National's tax cuts would also fund the government's 'Families Package', which aimed "to give low and middle-income workers a much-needed boost in incomes and address inequality and child poverty."

Robertson said economists agree there will be some softening of economic growth over the next year "as the housing market remains flat and as net migration tapers off slightly."

"Then, there is a consensus of a stronger growth track through 2019 and 2020 which is expected to be supported by government policies such as increasing R&D tax credits, increased wages and export growth," he said. "In other words, we’ll be swapping out population growth and the buying and selling of houses to each other as our two main growth drivers for much more sustainable ones. If that means slightly lower growth for a year while the transition to a productive economy occurs, then that will be a price worth paying."

(BusinessDesk)

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