Tax increases are "not inevitable", even as people look towards economic recovery amid the Covid-19 pandemic, according to economist Shamubeel Eaqub.
Mr Eaqub told TVNZ's Breakfast this morning while tax increases are not inevitable, we will see a "gradual increase in this over time."
"The reality is, what we would expect as New Zealanders of our government in terms of free health, education, police - all those other bits and pieces - simply cannot be funded out of the tax envelope we currently have."
Economic policies are expected to be the focus of the September general election. However, the only economic policy currently known is that of the Labour government, with the National Party expected to unveil its own policy at a later date.
Mr Eaqub said while the National Party has yet to release its policy, it isn't a cause for concern, noting, "when you're in the Opposition, you just don't have the resources to understand or divvy up those full-blown policies," he said.
"What we tend to find in election time is there is a lot of rhetoric and a lot of announcements of big ideas, big things that they want to do and things that the taxpayer wants to hear," he said.
"When it comes to being in power, you have the actual policy and analysis that goes with it, the detail, all the nuance that goes with it."
He said what people tend to find in reality is "very centrist policies", with National-led governments being "a little bit meaner and stingier when it comes to welfare," adding that Labour-led governments "doesn't improve it that much."
Mr Eaqub believes the largest issue in the lead-up to the election will centre around paying for the pandemic, with the Treasury forecasting up to 50 per cent of GDP as debt.
He said the last time New Zealand saw a large peak in debt was in the 1980s and '90s, which was coupled with high interest rates. However, with the country currently seeing record-low interest rates, there is "not the same urgency" to pay it back.
"At some point in time, we really do have to, because the reality is we still have this massive amount of borrowing that we're going to pile on to future generations."
Mr Eaqub said while there are concerns around the closure of our borders and its impact on the economy, he "wouldn't overplay" the issue, noting that open borders "might actually be bringing disease and creating more economic havoc."
"New Zealand's probably in a really great position in that we seem to have gotten on top of the disease and our domestic economy can, by and large, function unlike, say, even our neighbours in Australia."
He said there are two things the government must do, however, including providing support for businesses which have closed and people who have lost their jobs amid the pandemic, and investing in the country.
"It's around making sure our infrastructure is right, our water network is not leaking, making sure that we're doing the decarbonisation, the greening of the economy - these are all things we should have done anyway, but this is a really great opportunity to do it because we're going to have the political support from the voter base to do so."
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