National's debt reduction target lacks ambition - economist
Christopher Luxon says the country is vulnerable to economic shocks if the government's books are not in order.
An esteemed economist has criticized New Zealand's National Party's debt reduction target, deeming it the most modest they could possibly set. Should the party regain power following the November election, they plan to implement three fiscal responsibility rules: returning to a surplus by 2028/29, cutting debt below 40 percent of GDP, and gradually lowering government spending to around 30 percent of GDP over time.
National's leader, Christopher Luxon, argued that without fiscal order, the country would be susceptible to economic disruptions. During Sunday's announcement, Luxon criticized the previous Labour government for amassing debt while addressing the Covid-19 pandemic and reducing a financial safety net for future crises. Infometrics Chief Economist, Brad Olsen, commended the National Party's emphasis on fiscal responsibility but deemed the target of reducing debt to below 40 percent of GDP as the minimum ambition they could adopt.
Olsen questioned how National could reduce government spending, as they had ruled out new taxes, leaving only expense reduction as a viable option. While New Zealand's debt is currently lower than some comparable countries, Olsen emphasized that it must remain low due to the nation's limited taxpayer base, dependence on trading partners, and heightened vulnerability to natural disasters.
Labour's finance spokesperson, Barbara Edmonds, contended that the National Party's rules would merely perpetuate the current fiscal strategy, which she claimed was failing New Zealanders. Edmonds pointed to the rise in unemployment and the surge in KiwiSaver withdrawals due to financial hardship as evidence. ACT Party leader David Seymour suggested that National could only attain its budget objectives with ACT's support.
He claimed that without ACT, taxpayers would be burdened with billions more in debt. According to Seymour, additional savings are required to render these budget goals achievable.
Written by urgent.news from RNZ Business's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.
