It was the American polymath Benjamin Franklin who is credited with the quip that only death and taxes can be certain and a few wags have pondered that perhaps he meant debt and taxes. It’s a good joke but what Franklin actually wrote was “... excepté la mort et les impôts.”
That’s French. Franklin was writing in French. Dette and mort don’t rhyme. And given everyone his age had false teeth I think tooth decay should have been included. I am off-track.
The budget was a rhetorical success. A proposal to cut nearly 9000 civil servants and a sinking lid of two percent on core government departments. Impressive. Except the cuts didn’t apply to Health, Foreign Affairs, Education, Police, the corrections part of Corrections nor Oranga Tamariki.
Let me quote from the minister’s budget speech: “The net package incorporates $3.8 billion of new spending a year, on average. And it includes $1.7 billion of savings and revenue…”. We have more new spending than savings. The budget forecast states; “Core Crown expenses as a share of GDP were 32.6% in 2024/25 and are forecast to stay at 32.6% of GDP in 2025/26 and 2026/27”.
The claim is that spending as a share of the total economy, Spending divided by GDP, is static. This is optimistic. The key is the denominator. GDP.
Treasury estimates economic growth will increase GDP from 1.2% this year to 3.2% next year. No explanation from where these extra loaves and fishes will materialise but when the basket turns up empty next year’s budget numbers will look worse than Benjamin’s dentures.
In her 2024 budget speech the finance minister promised a 3.1 billion deficit for the 26/27 year. She missed that target by $8 billion. Please read that again and try not to damage the desk with your forehead. In 2024 the surplus was anticipated to arrive in 2027/28. It is now expected in 2028/29.
It will get worse. National had its conference last week and Luxon promised no spending cuts and $250 million in annual subsidy to bolster KiwiSaver while, incredulously, claiming “We’re the party prepared to make the tough calls.”
The only tough calls National is making is to the bond market.
To give Willis credit she inherited a structural deficit and has constrained spending. The evidence is that she is serious about fiscal management but is hampered by the political limitations of her own party, an obstructive civil service, and binding coalition arrangements. However. She is the minister in charge so the devaluing dollar stops at her desk.
It should also be acknowledged that had it not been for the recklessness of Prime Ministers Key and Ardern she would not have to find the $10 billion annual interest bill; without which her budget would be close to balancing. Still. By failing to confront the fiscal realities she is compounding a growing crisis.
Willis acknowledges that the cost of superannuation is increasing by 1.8 billion a year but does not outline measures to reduce this growing liability. The only way to lower spending is to reduce the welfare spend; superannuation, health, education and social welfare. These contribute 88% of government expenditure and let’s be honest with ourselves; we are never going to tackle this problem.
NZ Super spending:
Every second - $783
Every hour - $2.82m
Every day - $67.7m
spend rate steps up each 1 July
Source: The Treasury. Forecast to 2029/30 (Budget 2026); longer-term projections thereafter. Nominal dollars.
Meanwhile, Labour is promising a capital gains tax on property and the Greens want to tax the living hard and the dead harder. This will raise some Crown revenue in the short term but reduce economic activity so that the net result will be static revenue on a declining economy.
Default is inevitable.
In 2019, when gross core sovereign debt was 20%, we were paying less than 2% on new government borrowings. Today, with sovereign debt at over 40% and growing we are paying over 4% and gross debt is expected to hit 53% in 2028. It will continue to rise, as will the rate of interest, until our sovereign debt is higher than GDP and we are paying overseas lenders while our social services degrade.
This government is incurring more debt to pay the interest on past borrowings and they look fiscally responsible when compared to the menagerie of meerkats, marmots, and macaws on the opposition benches. (Marmots are impossibly cute; to be fair. I’d vote for a marmot). Other than the isolated puritans in Act no one wants to reduce spending.
Franklin is credited with the saying; a penny saved is a penny earned. Not quite. He was more poetic.
A penny saved is two pence clear, A Pin a day is a Groat a Year.
Save & have. Every little makes a mickle.
Wise advice that we will ignore until the bailiff comes for our standard of living.......The full article is published HERE
Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective
Let me quote from the minister’s budget speech: “The net package incorporates $3.8 billion of new spending a year, on average. And it includes $1.7 billion of savings and revenue…”. We have more new spending than savings. The budget forecast states; “Core Crown expenses as a share of GDP were 32.6% in 2024/25 and are forecast to stay at 32.6% of GDP in 2025/26 and 2026/27”.
The claim is that spending as a share of the total economy, Spending divided by GDP, is static. This is optimistic. The key is the denominator. GDP.
Treasury estimates economic growth will increase GDP from 1.2% this year to 3.2% next year. No explanation from where these extra loaves and fishes will materialise but when the basket turns up empty next year’s budget numbers will look worse than Benjamin’s dentures.
In her 2024 budget speech the finance minister promised a 3.1 billion deficit for the 26/27 year. She missed that target by $8 billion. Please read that again and try not to damage the desk with your forehead. In 2024 the surplus was anticipated to arrive in 2027/28. It is now expected in 2028/29.
It will get worse. National had its conference last week and Luxon promised no spending cuts and $250 million in annual subsidy to bolster KiwiSaver while, incredulously, claiming “We’re the party prepared to make the tough calls.”
The only tough calls National is making is to the bond market.
To give Willis credit she inherited a structural deficit and has constrained spending. The evidence is that she is serious about fiscal management but is hampered by the political limitations of her own party, an obstructive civil service, and binding coalition arrangements. However. She is the minister in charge so the devaluing dollar stops at her desk.
It should also be acknowledged that had it not been for the recklessness of Prime Ministers Key and Ardern she would not have to find the $10 billion annual interest bill; without which her budget would be close to balancing. Still. By failing to confront the fiscal realities she is compounding a growing crisis.
Willis acknowledges that the cost of superannuation is increasing by 1.8 billion a year but does not outline measures to reduce this growing liability. The only way to lower spending is to reduce the welfare spend; superannuation, health, education and social welfare. These contribute 88% of government expenditure and let’s be honest with ourselves; we are never going to tackle this problem.
NZ Super spending:
Every second - $783
Every hour - $2.82m
Every day - $67.7m
spend rate steps up each 1 July
Source: The Treasury. Forecast to 2029/30 (Budget 2026); longer-term projections thereafter. Nominal dollars.
Meanwhile, Labour is promising a capital gains tax on property and the Greens want to tax the living hard and the dead harder. This will raise some Crown revenue in the short term but reduce economic activity so that the net result will be static revenue on a declining economy.
Default is inevitable.
In 2019, when gross core sovereign debt was 20%, we were paying less than 2% on new government borrowings. Today, with sovereign debt at over 40% and growing we are paying over 4% and gross debt is expected to hit 53% in 2028. It will continue to rise, as will the rate of interest, until our sovereign debt is higher than GDP and we are paying overseas lenders while our social services degrade.
This government is incurring more debt to pay the interest on past borrowings and they look fiscally responsible when compared to the menagerie of meerkats, marmots, and macaws on the opposition benches. (Marmots are impossibly cute; to be fair. I’d vote for a marmot). Other than the isolated puritans in Act no one wants to reduce spending.
Franklin is credited with the saying; a penny saved is a penny earned. Not quite. He was more poetic.
A penny saved is two pence clear, A Pin a day is a Groat a Year.
Save & have. Every little makes a mickle.
Wise advice that we will ignore until the bailiff comes for our standard of living.......The full article is published HERE
Damien Grant is an Auckland business owner, a member of the Taxpayers’ Union and a regular opinion contributor for Stuff, writing from a libertarian perspective
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