Budgeting during a cost of living crisis

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“We have to get through this difficult year of 2022, but we also know that we want a health system that works very well in 23 and 24 as well”, – Grant Robertson

It’s budget time again, but 2022 brings a number of major economic challenges.

These include massive cost pressures affecting households, businesses and government; continued supply chain shocks and disruptions compounded by the ongoing war in Ukraine; the affordability of housing through the roof; expectations regarding climate change, poverty and inequality and the financing of major reforms such as health.

National finance spokesman Nicola Willis said the biggest challenge for Finance Minister Grant Robertson is the cost of living crisis.

RNZ political editor Jane Patterson sat down to chat with Willis and Robertson, ahead of this Labor government’s fifth budget.

Photo: RNZ

Willis says the cost of living affects all New Zealanders and inflation is a thief on our doorstep.

She says she would expect direct household income support, but with more taxes collected by the government than before, and claims the government has a history of wasteful spending.

“You would have to assume that he thinks he can spend New Zealanders’ money better than them, and I just don’t agree with that premise.

“Examples like $51 million spent on consultants for an $800 million bike bridge that hasn’t been put in place speak to a culture and government that isn’t great, but it’s about also expenses that have not been sufficiently well planned and targeted to results.”

She says National’s proposal to cut taxes — including the top 39% tax bracket for incomes over $180,000 — strikes the right balance.

“Grant Robertson collects about $14 billion more in income tax this year than when he took office, our package would cost $1.7 billion…that would mean the average household would benefit to the tune of $1,600 per year. We think that’s significant.”

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Robertson admits that 2022 is an “extremely difficult year” and that the government must balance its long-term goals with short-term needs.

“It’s tough on households, you know, it’s the impact of two years of Covid, and now this spike in global inflation… the surplus is now coming a year later when we thought this n It was even a matter of a few months ago, it shows you how much the numbers are changing.”

He says Covid has taught us that health reforms must go forward, and discussions over the past week about how to tackle the backlog of planned care operations delayed by the pandemic highlight difficulties in getting 20 district health boards to work together.

“Those kinds of things are actually important for being more productive, but also more efficient in how we use our money.”

He has signaled for some time that along with health, climate change will be the other big focus of this budget, and says it will be done primarily through the Climate Emergency Response Fund.

“And I think that’s the right thing to do. It’s obviously the first time we’ve taken that revenue from the emissions trading system and just said ‘it’s for emission reductions.’ “

He says the government will make a significant contribution to the fund in this budget and that will and will require continued investment, but the New Zealand economy is in good shape.

“We’ve come through this with a bigger economy than it was before Covid… the ratings agencies saying ‘yes you’re in good shape, triple A, we’re ready to back you’; we’ve gotten ourselves into a position where our debt is manageable, under control and low relative to the rest of the world.”

The global environment is very challenging, Robertson says, but he argues that only strengthens the case for investing.

“The price of oil is the main driver of inflation. If we can move to decarbonize our transport fleet, then we are well on our way to being able to withstand these kinds of shocks.”

The war in Ukraine has prolonged Covid-19 inflationary pressures and supply chain disruptions, but Robertson says it will start to ease later in the year, and some analysts predict it could come sooner. provided that.

“There’s a bit of hindsight from 2020 coming from some of my political opponents to say ‘look at the magnitude of what you’ve undertaken’. Yeah, that’s because the rainy day came and we supported and protected New Zealanders and we ended up with an unemployment rate of 3.2%, we should be happy with that result, but realistic that we now have to start going back to a bit more of the type of tax rules that we’ve had in the past.”

He says the government is always looking at its spending to make sure it’s getting value for money, and that infrastructure spending is important to help improve productivity.

Some of the extra tax revenue comes from inflation, he admits, but some comes from companies making more money or more people working, and he thinks now is not the time to cut Taxes.

“The IMF also supports this…we are still in the shadow of a Covid pandemic, still facing unmet demand, and many areas of public services, health, education, housing, etc. So over time, of course, we would like to look at these issues, but I don’t think now is the right time.”

in today Focus on politics podcast, political editor Jane Patterson sits down with Finance Minister Grant Robertson and the National’s Nicola Willis for a preview of this month’s budget.

Listen to Focus on Politics for free on Apple podcaston Spotifyon iHeart Radio or wherever you get your podcasts.

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