Robertson debates use of surplus

The Government accounts should provide a rosy picture of the New Zealand economy but Labour finance spokesman Grant Robertson says the time has come for a debate on how to use the growing surpluses.

The Treasury releases its half-year economic and fiscal update on Thursday.

Since the Budget in May, the fiscal numbers have been tracking ahead of forecasts, which is consistent with the economy itself.

Mr Robertson told the Otago Daily Times in Dunedin yesterday New Zealand had a growth rate of 3.5%, a big number compared with other parts of the world.

However, behind the numbers, a different story was painted.

New Zealand was having its largest population growth for some time, through immigration, and on a per capita basis, growth was barely 0.5%.

``So yes, there is GDP activity in the economy through population growth but the challenge is to lift productivity. The high activity numbers hide the truth about the economy.

``People say they are working harder than ever but are not getting ahead. This is the reason. Wages are increasing only slightly. They are not increasing on how people are working - longer and harder.''

ANZ chief economist Cameron Bagrie said earthquake costs would be a feature for the next couple of years. At this stage, any estimates were subject to a great deal of uncertainty, something Treasury was likely to emphasise.

Higher near-term cash requirements would probably result in a modest lift in bond issuance. Much would hinge on assumed earthquake costs, when those costs occurred, and to what degree that was offset by a likely stronger underlying fiscal situation, he said.

Tax cuts were being mooted, along with additional support for families.

Budget allocations - provisions for new initiatives - incorporated into forecasts in Budget 2016 were $1.5billion for the 2017, 2018 and 2019 Budgets. There was money in the tin, Mr Bagrie said.

Health and education chewed up a lot of the Budget allocation each year and strong population growth required lifts in baseline funding.

``Core government services still need funding and you won't get much of a tax cut for less than a $1billion spent.''

Mr Bagrie believed the earthquake-related costs would be more substantial than assumed. The repair bill for State Highway 1 alone, or a new one, would be enormous.

The accounts were only barely in surplus and projected surpluses were nothing more than that, a projection.

``Hockey-stick style forecast uplifts in the surplus tend to evaporate in reality. So there are going to be some trade-offs, and any discretionary spend-up or tax-cut package will need to be spread over a couple of years,'' he said.

Mr Robertson said Government had played ``good cop, bad cop'' about tax cuts and it was time for a debate to be held on the best use of surpluses.

``I am relishing this debate. I am not against growth. Any government doing its job properly will be reporting surpluses. The debate I want to have is about spending the money.

``The Government needs to really pay down debt, actually doing it, rather than just talking about it.''

Rising surpluses also allowed for the Government to restart paying contributions into New Zealand Superannuation Fund and lifting public service spending.

Health spending was well below what it should be because of the rising population and Mr Robertson said the extra money could be used to cut back on people spending so long on waiting lists.

Housing was a major issue needing to be addressed.

Labour was taking a cautious approach to the Treasury surplus forecasts and would focus on them only for the next one or two years ahead.