It speaks volumes of the magnitude of the impact of Covid-19 on the economy that when second-quarter gross domestic product figures showed a historic plunge of 12.2%, several commentators thought that was a good result in the circumstances.
Finance Minister Grant Robertson certainly thought so, claiming the Government’s quick action forestalled the Treasury forecast of a 16% drop.
National and Act New Zealand, naturally, begged to differ: National’s finance spokesman, Paul Goldsmith, said the anaemic economic performance showed Labour did not have a recovery plan, while Act leader David Seymour blamed Labour’s irresponsible borrowing and spending.
Even New Zealand First was antsy about the figures, leader Winston Peters saying Australia’s economy was doing better and asking why New Zealand was lagging behind.
New Zealand, as expected, is now officially in recession.
With the Government having borrowed billions of dollars to fund Covid-19 control measures, to preserve jobs through the wage subsidy and to fund infrastructure projects intended to spearhead an economic recovery, whichever parties govern after October 17 will find both that their ability to deliver on expensive promises is severely constrained, and that management of government debt will be a major priority.
Treasury reinforced the bleak numbers in its pre-election fiscal update, albeit with the far-from-rosy caveat that the numbers were not as bad as it had expected.
The worst of Covid-19-related unemployment is still to come, about 7.5% in 2021 and 2022, and Treasury’s medium-term view has deteriorated due to the seeming inability of New Zealand’s export partners to curb the impact of the disease on their economies.
Net Crown debt has soared from $25 billion to $83 billion, but again Treasury said things could have been worse but for the books being in good shape before Covid-19 arrived.
Each party wants the credit for the good financial times — Labour claims they were due to its prudence, National that Labour inherited its good work when it took over the Treasury benches in 2017.
Each party also claims to know how to bring the good times back again, although given the international situation, when that might be is anyone’s guess.
Labour’s plans focus on supporting business and preserving jobs, with a package to keep Covid-battered businesses afloat and a $200 million regional strategic partnership fund to keep the provinces working.
To repay debt, it has said it will raise taxes, but through creation of a new top tax bracket for those who earn more than $180,000, rather than asking everyone to share the pain.
That plan was dismissed as timid by those on the right of the economic spectrum. National proposed tax cuts in response — and Act called for huge ones.
National pledged to put about $50 a week back in the wallets of average earners over the next 16 months, and to restore net debt to under 35% of gross domestic product by 2034.
However, National was left red-faced when it was found it had used out-of-date figures to prepare and cost its policies, a multi-billion mistake that Labour revelled in pointing out.
Dismissing the glitch as an ‘‘irritating mistake’’, National emphasised its promise to restore a surplus by 2028.
Act saw National’s tax cuts and raised them, saying that, if elected, it would reduce the 30% tax rate to 17.5% and cut GST to 10% for 12 months.
Leader and finance spokesman David Seymour has been spruiking Act’s fiscal bona fides for months now, to the extent of having produced its own full alternative Budget.
While some might blanch at $7.6 billion in proposed spending cuts, a three-year moratorium on minimum wage increases and repealing the Zero Carbon Act and the oil and gas exploration ban, it is at least a genuinely alternative plan.
From the polar opposite end of the political spectrum, the Greens are equally alternative with their economic prescription.
Rather than slashing spending, the Greens would increase it on under-pressure public services such as health and education.
It would also overhaul the tax system to ensure the poor earned more and the rich paid more, with the introduction of a guaranteed minimum income, a wealth tax and a financial transactions tax, and increase the amount of tax paid by those in the top earner brackets.
Corporate tax would also be reformed, with an emphasis on increasing funding to sustainable resource use, waste reduction and elimination of pollution.
New Zealand First has issued an ‘‘ironclad commitment’’ that it would not support increases in personal or business taxes.
It would also offer a tax break for new exports of 20%, reduce corporate tax and continue giving tax credits for research and development.
The party would also support reintroducing 90-day trials for new employees, and maintain the Provincial Growth Fund.
