The very long road to fiscal recovery
Treasury's latest update showed only small glimmers of light at the end of the tunnel.
Mōrena, and welcome to The Bulletin for Wednesday, December 18.
In today’s edition: The number of people killed by a devastating earthquake off the west coast of Vanuatu has risen to 14, the controversial fast-track consenting bill will become law, and the minimum wage will rise by just 1.5% in April. But first, doom and gloom in the Hyefu.
Hyefu delivers doom and gloom
Christmas came early for political wonks and economists yesterday with the release of the Treasury’s Half-Year Economic and Fiscal Update – or Hyefu. But, while there was plenty to chew over, it was less a festive present and more a lump of coal. As the Herald’s Thomas Coughlan explained (paywalled), while skilfully weaving the phrase “Brat summer” into the first line of his story, there’s almost no good news from Treasury’s latest forecasts. Unemployment is tracking up, GDP growth will be pretty much flat in the year to June 2025, and the government’s tax take is $13 billion lower over the forecast period.
Bernard Hickey and economist Craig Renney had a good wrap of the top lines for The Kākā, arguing that the government’s “austerity” approach (Hickey’s word, certainly not the government’s) had caused the economy to dive deeper into recession.
The blame game
There is a general consensus across the parliament that things are pretty grim, even if the government has tried its best to argue there’s light at the end of the (very long) tunnel. But as is typical in politics, nobody is claiming responsibility. In what feels like it could be perfectly represented by that “spider man pointing meme”, the government and the opposition are blaming one another for how we’ve ended up in this situation. We’ve been here before. A quick Google search shows Willis blaming Labour for the state of the books after last year’s Hyefu and this year’s budget, but you have to wonder how long that excuse remains a helpful one (Mike Hosking’s “rule of thumb” is that you get one term to blame the last government, which seems fairly generous). Willis also believed that Treasury’s previous outlooks were overly optimistic.
Speaking to Andrew Dickens on Newstalk ZB this morning, Labour’s finance spokesperson Barbara Edmonds said the blame fell squarely at the feet of Nicola Willis and the coalition. “Nicola Willis is borrowing more, has more debt, a larger deficit… we’re not sure why she’s borrowing more except for tax cuts [and] she chose to bringing back interest deductibility for landlords. For me, it’s her reputation that is in tatters.”
Obegal…X?
As if the various budget acronyms weren’t confusing enough, the finance minister Nicola Willis unveiled a new one yesterday: ObegalX. As RNZ’s Jo Moir explained, it refers to the standard Obegal – or operating balance before gains and losses – but without the ACC deficit. Under this measure, New Zealand will be able to return to surplus in the 2027/28 financial year – a one-year delay in returning to surplus. It’s a convenient financial solution given that with ACC included, as it normally would, the books are forecast to stay in the red until the end of the decade. All up, it will be nine years of deficit, which Moir said would make it three years longer than after the Global Financial Crisis and Canterbury earthquakes.
1News’ Katie Bradford noted that Treasury disagreed with the removal of ACC from the measures, but the finance minister “forged ahead”. Nicola Willis defended the forecasts being pushed out: "the hill we have to climb is steeper than it was a year ago".
Will we thrive, or barely survive, in 2025?
All the bad news makes it seem as though the “survive to ‘25” mantra should really be reframed as “survive through ‘25”. As The Post’s Anna Whyte reported, government departments won’t be receiving any additional funding in May’s budget and further cuts are expected. A charities tax, as has previously been hinted at, will also feature in the next budget, while Politik’s Richard Harman noted (paywalled) that Willis remained interested in a foreign buyer tax akin to what was campaigned on in 2023.
But there’s a large gap to fill. Thomas Coughlan (paywalled) puts the state of the books in context: “Labour could, on coming into office, legislate its 2023 wealth tax and still not close the structural deficit… Likewise, the coalition could cancel their tax cuts, worth about $3.7b a year, and still be only halfway to closing the structural deficit.” His colleague Claire Trevett, in an excellent in-depth report this morning that goes behind the scenes of the coalition government, noted that ministers will already be making budget bids but that there is limited chance for success. Reprioritisation will, once again, be the name of the game. The government has undoubtedly weathered some storms already, but there’s a long way to go.
Auckland City Mission delivers dignity and holiday cheer, but faces funding uncertainty
Auckland City Mission has taken over Eden Park to share kai and festive fun with whānau this Christmas. The Mission, along with iwi partners and scores of volunteers, will distribute 7000 food boxes this season. Without an ongoing funding commitment from the government, the future of this community support is uncertain. Read the full story, here. (sponsored)
Vanuatu quake: Death toll rises to 14
The number of people killed by a devastating earthquake off the west coast of Port Vila has risen to 14, 1News reports. There have also been 200 people treated for injuries. New Zealand’s prime minister Christopher Luxon said the government was monitoring the situation closely and was standing by “ready to help” if needed. Australia would also be providing support. A tsunami alert issued shortly after the 7.3 magnitude quake hit has been cancelled.
It’s possible the number of casualties will rise. AP News reported multiple buildings had collapsed with people said to be trapped inside. There have been unconfirmed reports of bodies lying in the street, according to the BBC. The international shipping terminal and airport runway were damaged, potentially delaying the recovery effort.
An update on the response to our open letter
It’s been a fortnight since we published our open letter outlining our current reality.
We revealed that only 2% of our audience support us financially and shared the real need to double the number of members who support us with monthly or annual payments. As of today, we are over one third of the way towards that target.
The response to our letter has been encouraging. Thank you to all our existing members who responded by donating or increasing their contributions. We’re grateful to all who also decided to sign up again. Welcome to our new members. We’re delighted to have you.
We still have a way to go, but the support has made us as determined as ever to get there. Please continue to spread the word and share the letter. You can also gift someone a membership for Christmas or donate as an organisation or company.
If you haven't yet, please become a member or donate today.
Best of 2024: The best cheese scone in Auckland
As we race towards the end of the year, it’s time to take a look back at some of the biggest and best Spinoff stories from 2024. This morning: Madeleine Chapman reveals where you can find Auckland’s best cheese scone. First published on June 6.
I don’t even know how to explain why it was so good but I’ll try. Many cheese scones are just so unbelievably dry. Like messy-to-eat dry. You can tell as soon as it’s put down at the table, and it’s confirmed when you try to butter it and it crumbles under the knife.
Get the best of the Spinoff this year sent to you over summer
Sign up for The Spinoff Daily to receive our twice-weekly summer digest. Sent to you at the leisurely time of 10am on Tuesdays and Fridays over the summer break, you can enjoy a handpicked selection of the best of The Spinoff this year. perfect for beach, bach, backyard or travel reading.
Click and Collect
The controversial fast-track consenting bill has passed its third reading in the final week of parliament for the year. RNZ’s Farah Hancock takes a look back at the nine month journey to see the bill become law.
The newly reopened Wynyard Crossing bridge in Auckland, that just underwent $10.6m in repairs, is out of action again.
A wild report from The Post’s most reliable scooper Andrea Vance, revealing that a district court judge and her partner have apologised for “verbally attacking” Winston Peters, Casey Costello and other New Zealand First members at a Christmas party.
For Newsroom Pro subscribers, Laura Walters explains why the country’s largest education union is due to file a claim with the Waitangi Tribunal. (paywalled)
The minimum wage will rise by just 1.5% in April 2025, less than the rate of inflation. Deputy PM Winston Peters says it may need to rise more next year in order to meet a coalition promise between National and New Zealand.
Christopher Luxon not attending Waitangi Day would show he "has no balls and may be a drop-nuts", according to Te Pāti Māori co-leader Rawiri Waititi.
I really enjoyed this (paywalled) interview with parliament’s speaker Gerry Brownlee by Audrey Young that includes some interesting tidbits from the first 12 months of the coalition government. You’ll need a Herald Premium sub to read it.
The Wellington City Council is done for 2024: inside the final meeting of a very, very busy year.
Toby Manhire and Ben McKay present the annual Golden Jandal awards for conspicuous contributions to New Zealand politics. I revisit our outlandish predictions for 2024. The Spinoff Members have voted on their favourite books of the year; here are the results. Spinoff staff writers ruminate on their favourite television shows of the year. Empty classrooms, silent language: Liam Rātana reports on the kōhanga reo crisis. For The Cost of Being, a public servant and mum saving for a house deposit considers her costs.
That’s it for another day. Thanks for reading and see you back here tomorrow.
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It has been obvious from day one of this Government that Nicola Willis could hardly add 1+1. Putting together tax cuts for her buddies and paying for it by slashing essential services is far from reality it is evident that she lives far above any political glass ceiling and is completely incapable of her job.
Regardless of which way Tricky Nicky likes to spin it, this is essentially an austerity govt. Significant job loses, cuts to welfare services, tightening of criteria for welfare assistance and wholesale spending cuts, all guaranteed to drive the economy into recession. It's ideological clap trap with no basis in reality. Why are they surprised ? Beginning to think we are governed by idiots.