Budget 2024 is here – and two economists joined Breakfast to discuss how they would like to see it play out.
NZ Initiative chief economist Eric Crampton told Breakfast he would like spending greatly reduced in the impending Budget.
“What I would like to see today is a very clear path to get spending down to pre-Covid levels.
“They won’t be able to do it this year, but they should be able to do it over the next three years. The only real tax cut is a spending cut, right now because of the amount of the deficit.
“[The deficit] pushes the burden onto future taxpayers what tax relief we get might sound good, but without a spending reduction we’re going to be in trouble.”
He added since 2019 and the Covid-19 pandemic, government spending had gone up and — although the pandemic was now not what it was — the spending "has stuck".
Meanwhile, tax expert Terry Baucher said he was less “gung-ho” about reducing the government deficit.
“Inflation has been a big problem, but the short answer is we have not been spending enough, because our infrastructure is terrible.”
Baucher said, coming from Auckland, where traffic was "at a standstill every time it rains" means “we need investment at higher levels”.
“If we’re going to have a wishlist, one of the things we have talked about is I would like to see a real shift in the tax system to improving productivity.
“That would come back to tackling our over investment in housing. The interest deduction rule wasn’t popular, but it did start to address that. I’d say this is one of the things affected by a capital gains tax perhaps, or other form of taxing housing.
“That gives [incentive] to what is an unproductive asset. We’re far too much tied up in unproductive property.”
Crampton said the Government should introduce road user charges to pay infrastructure projects, such as roading upgrades.
“We have a structural deficit. So it isn’t just that government is spending more when you get into downturns and it isn’t just infrastructure spending because that will come out of the capital account.
“We borrowing to pay for normal everyday operations and that’s not sustainable.”
Despite the disagreements, both economists agreed the Government should have an automatic indexation on spending to account for inflation.
According to Crampton, this meant the Government would have to be open and ask for more money if it is required.
“I would really hope to see inflation indexation after we get back into surplus, and have it done automatically so we don’t have to keep having these agonies every time there’s been a decades worth of accumulation.”
Baucher agreed, and said Crampton "made a very good point".
"We need to have automatic indexation because otherwise governments [introduce] sneaky tax increases all the time, and then the pressure gets to the point they have to do something. The timing might not be perfect, but they have to do something.”
Protests nationwide on Government policy affecting Māori
The nationwide day of action to protest the Government's policies affecting Māori got underway in mostly fine weather around the motu.
Te Pāti Māori and others connected to the Toitū Te Tiriti (Honour the Treaty) movement have called for strikes as a follow up to last year's National Māori Action Day.
Organisers called for all Māori and Tangata Tiriti to protest the government's policies affecting Māori ahead of Budget 2024.
A number of hīkoi were expected to cause major traffic disruption.
Auckland Airport has warned travellers to take into account the possibility that a National Action Day hīkoi may affect roads.
"Planned protests are expected on motorway routes throughout Auckland and disruption is expected across the entire Auckland urban roading network. Please plan ahead."
In response to the planned action, police said officers would be highly visible across the roading network throughout the morning.
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