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Mini budget, Aussie relations, Xmas rush and monetary policy

ANALYSIS: Nicola Willis used opening of books to attack former government's fiscal and economic management.

WATCH: NBR political editor Brent Edwards speaks with Grant Walker.

Brent Edwards Fri, 22 Dec 2023

It promised so much but perhaps failed to deliver.

Under pressure the new Government did deliver a mini budget this week, alongside the half-year economic and fiscal update, although by the time it came around Finance Minister Nicola Willis had been referring to it as a mini, mini budget. But in the lock-up for the release of the updated forecasts journalists were also handed a skimpy folder titled “Mini Budget 2023”.

It contained four press statements on strengthening fiscal responsibility rules, the fiscal repair job, the economic clean-up and the first steps for tax and income relief.

While there might have been expectations the mini budget would lay out the details of the tax cut plan, by raising tax income thresholds, the actual announcement was pretty light.

“The Government is progressing work to deliver meaningful tax reduction in next year’s Budget,” Finance Minister Nicola Willis said in the statement on tax.

Before that though the Government will announce early in the new year details of the restoration of interest deductibility for landlords, which is part of National’s coalition agreement with the Act Party. It is due to start at 60% deductibility from April 1, rising to 100% over the following two years.

NBR presenter Grant Walker asks if we learned anything from the mini budget apart from the fact tax cuts were still coming and that landlords will be better off?

Finance Minister Nicola Willis.

Negative forecasts

The opening of the books did show the forecasts have again got more negative and the $2.1 billion surplus expected in 2026-27 has now shrunk to a measly $140 million.

Willis used the numbers to attack the previous Government’s fiscal and economic management, saying the update laid bare the “extent of Labour’s economic and fiscal vandalism”.

She also unveiled more plans to find more cuts to government spending to help get the books back into the black, but details on those will probably have to wait until the Budget once government agencies have gone through their spending line-by-line to determine what they could or should cut.

While Willis was unveiling her mini budget Prime Minister Christopher Luxon was in Sydney meeting Australian Prime Minister Anthony Albanese.

It is almost a rite of passage now for a new Prime Minister to fly across the Tasman as soon as possible to meet their Australian counterpart. Chris Hipkins did the same thing when he succeeded Jacinda Ardern as Prime Minister earlier this year.

It makes sense too because the trans-Tasman relationship is arguably New Zealand’s most important.

In Luxon’s case he has come back confirming the Government is exploring joining the non-nuclear 'pillar two' of the Aukus agreement and to do its share of “heavy lifting” in the defence alliance with Australia.

But his comments on pillar two appear remarkably similar to the approach the previous Government took. It is a matter of exploring what opportunities might exist for New Zealand in getting access to new non-nuclear technologies that have a military application. 

Aukus, though, is not without its critics, including in Australia, and Otago University international relations professor Robert Patman told RNZ that joining the non-nuclear pillar of Aukus carried a reputational risk.

Prime Minister Christopher Luxon made a quick trip to Sydney this week.

Rush to Christmas

This week, in the final rush before Christmas, Parliament again sat in urgency as the Government finished its agenda for repealing Labour laws.

For example, the National and Built Environment and Spatial Planning Acts were repealed, and planning law reverted to the old, much-maligned Resource Management Act, although with a fast-track provision retained to try and speed up the consenting process.

Over the next couple of years or more the Government will then have to come up with replacement legislation which finally puts the RMA to rest.

Let’s Get Wellington Moving was scrapped and the Government reinstated the right of all businesses, not just small ones, to use 90-day employment trials.

The Government is also reversing Labour’s reform of vocational education by scrapping Te Pūkenga and going back to separate regional polytechnics. But many are in financial trouble and, given the uncertainty in the sector, many senior executives are jumping ship.

New Tertiary Education and Skills Minister Penny Simmonds, who was previously chief executive of the Southern Institute of Technology, appears to have got offside with some in the sector and faces a challenge getting polytechnic training back on track.

Tertiary Education and Skills Minister Penny Simmonds.

Monetary policy

Finally, Reserve Bank governor Adrian Orr appeared before Parliament’s finance and expenditure select committee this week, following the recent release of the bank’s latest monetary policy statement.

This time he was being quizzed by Labour’s finance spokesperson Grant Robertson, who only a few weeks earlier had been Finance Minister. Orr told the committee the bank remained wary about inflation pressures.

He also told the committee that the new Government’s move to change the bank’s dual mandate to a single focus on inflation was consistent with the views the bank expressed in its remit review.

“The remit makes it more explicit, that price stability is our primary objective, and we hope that will help communication.

"I do want to repeat that we would not have made any different decisions on monetary policy in the past five years under the new remit,” Orr said.

Reserve Bank governor Adrian Orr.

Contact the Writer: brent@nbr.co.nz
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Mini budget, Aussie relations, Xmas rush and monetary policy
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