A leading economist says the Government is "being cute" about saying it is not borrowing for tax cuts, while another agrees, saying "it's not hard maths to work out".
Finance Minister Nicola Willis has repeatedly said the Government will not borrow to fund tax cuts, the size and scale of which are also yet to be confirmed. She has also said tax cuts would be funded from "reprioritisations" - including cuts to the public sector.
She repeated the comments today in a Finance and Expenditure select committee, saying: "We won't be borrowing extra to pay for tax relief and it won't add to inflationary pressures."
Labour finance spokesperson Barbara Edmonds asked if the Government would "be borrowing at all" in its Budget, which will be delivered on May 30.
Willis said the books left by the outgoing, Labour-led Government required borrowing "simply to meet day-to-day costs".
"So that is borrowing. Yes."
She repeated the Government would "not be borrowing for tax relief".
"The reason for that is that when we choose to reduce taxes, there are two ways that we can go about funding that.
"One way is to simply add that on top of operating allowances and therefore to add to the borrowing burden for New Zealand in order to fund that tax reduction.
"The alternative course which our Government has taken is to undertake a program of reprioritisation to stop some areas of spending where we do not believe there is maximum value being delivered, to raise limited amounts of revenue through other tools, and to use those two things to offset tax reduction.
"That is the course we have taken. And what it means is that tax reduction is fiscally neutral in this Budget."
But independent economist Cameron Bagrie said if savings were identified and one chose not to bank the savings but use the savings to fund an initiative, "one plus one equals two".
"You're implicitly borrowing to do it because it could have gone towards retiring debt or issuing less debt.
"They're borrowing because they've got a mismatch between expenditure and revenue and tax cuts give you less income. It's not hard maths to work out.
"That money could have been used to borrow less. The maths is pretty simple.
"I suspect there's going to be a little bit of smoke and mirrors around this in regard to whether it be nominal borrowing or whether it be debt as a share of GDP."
'Same pool of money'
Fellow economist Shamubeel Eaqub said the Government's language around the issue was "a bit cute, right?"
"It's the same pool of money.
"You only have to borrow when your expenditure outstrips your revenue. The reason you borrow money is because you haven't got enough money to fund your expenses and the net effect is what matters. By talking about revenue and expenses as somehow separate doesn't really change the fact that the end result is still the same as the net position."
Asked if that meant Willis' phrasing around what the borrowing was for was just politics, Eaqub said "of course it is".
He said he did not think it was fair for Willis to say the Government was not borrowing for tax cuts.
Eaqub said that the Government was borrowing for tax cuts was not "catastrophic" but it did differ from what National promised in the election.
After the select committee Edmonds told 1News that after weeks of commentating on New Zealand's unsustainable debt levels, Willis had "admitted" she would borrow to help meet her Budget commitments.
"National’s tax cuts were never affordable and never properly costed, and yet they’re pushing ahead despite deteriorating economic conditions.
"As bank economists and commentators have observed, if Nicola Willis delivered her Budget as she plans, without the restoration of interest deductibility and tax cut package, she would need to borrow more than an estimated $11b less over the forecast period.”
Earlier, she posted on social media Willis had been "gaslighting New Zealand's debt level" and "finally confirmed they will be borrowing more".
"They wouldn’t need to borrow more if they hadn’t promised tax cuts."
Green Party co-leader Chlöe Swarbrick said the Government took tax cuts and any other spending "from exactly the same coffers".
Willis has been approached for further comment.
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