Labour rejects claim of $17b hole in budget

National's attack on Labour over the alleged $17 billion "hole'' in its economic plan ignores more than $1 billion a year in proceeds from the state-owned assets National would sell and the assets generated by Super Fund contributions, Labour's David Parker says.

Associate finance spokesman Mr Parker led Labour's defence against National's criticisms as his party unveiled the keenly anticipated numbers underpinning its economic transformation plan this morning.

The credibility of those numbers became an important election issue after Prime Minister John Key goaded Labour leader Phil Goff about them during a debate earlier this week.

This morning Mr Goff said Labour's borrowing relative to National would peak at $4 billion in the 2016/2017 financial year.

"But from 2017/2018 we will be paying back the debt faster than a National Government would because of the ongoing asset returns and the increasing revenue of our fairer tax package,'' he said.

Mr Parker said National was wrong on three major counts which between them counted for more than half of the $17 billion "made-up hole'' in Labour's figures.

National's own figures, against which Labour's were being compared, hadn't factored in lost dividends from selling up to half of state-owned enterprises (SOEs), "despite it standing out like dog's balls''.

"You can't sell an asset and pretend you're still going to get the revenue ... Within four years that's half a billion dollars.''

Labour's figures this morning show it expects to receive ordinary and special dividends from the SOEs of just over $845 million in the next financial year, rising to $1.28 billion five years later.

Under National, that cashflow would be halved.

Mr Parker said National had also "tried to ping us'' for resuming NZ Super Fund contributions.

"They've ignored the asset it purchases. How fair is that?''

The third major misrepresentation was over the cost of Labour's plan to part fund the Auckland inner-city rail loop, Mr Parker said.

"They have said we have not funded that. You all know that we are funding that through cancellation of the (Puhoi to Wellsford) holiday highway and in fact we come out ahead.''

National had budgeted $1.7 billion for the project but Labour would spend $300 million to $400 million making the "required'' but cheaper highway improvements, leaving more than enough for the $1.2 billion it would contribute to the rail link.

"It is not us that have misrepresented the Standard & Poor's downgrade. It is not us that said the capital gains that would put a dagger through the heart of the economy. And it's not us that's misrepresenting the figures,'' Mr Parker said.

But Mr Key said Labour's claim it would borrow only $4 billion over the next four years was a "shambles''.

"If you take the New Zealand Super Fund, for example, he's saying if you have a mortgage against your home, that [debt] doesn't count and the day you buy the house, you should book the profits of what you think you might be able to sell the house for some time in the never-never.

"And he's wanting New Zealanders to believe that's real, at a time where we're living through the most volatile financial markets and stockmarkets in the world.

"It might be a form of economic management that Greece is happy with, but it will not work in New Zealand.''

Mr Key again played the 'I spent my life as an investment banker' line to talk up his financial literacy.

"The definition of borrowing is where you issue a bond. Ask Phil Goff if he'll be issuing bonds for $4 billion, or a lot more than that.''

He said restoring early childhood education centres (ECE) to having 100 per cent-trained staff would cost $400 million a year, and the Government only has $800 million in new operating money a year.

"Their numbers don't add up. They're using a Greek calculator.''

But a Labour spokeswoman said its numbers included an allowance for yet-to-be announced policies over and above that $800 million.

"We have not announced our ECE policy and we have not announced how much we will spend on it. So he is wrong on all counts.''

- The New Zealand Herald

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