Bryce Wilkinson: A historical perspective on the 2017-2023 Government's spending spree

In this research note, we analyse the six-year spending spree of the Sixth Labour government in the context of historical precedents.

Elected on the back of an ambitious policy agenda, the Ardern government quickly found itself struggling to balance the books. Their Fiscal Plan prior to the 2017 general election forecast an $11.7 billion increase in government spending in the five years to June 2022.

Increased government expenditure is often seen during crises, and it is a challenge to use these funds efficiently. However, this research illustrates how the Sixth Labour government's spending spree continued to spiral out of control in a textbook case of Higgs's Ratchet Effect.

Drawing on tax receipt data that goes back to the 1910s, this report situates the Sixth Labour Government in historical context. By drawing parallels with past governments, we find that the First Labour Government set somewhat of a precedent of big spending.

The next government will need to make tough decisions about public finances, and it would be wise for them to learn from its big-spending history.

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Dr Bryce Wilkinson is a Senior Fellow at The New Zealand Initiative, Director of Capital Economics, and former Director of the New Zealand Treasury. His articles can be seen HERE. - Where this article was sourced.