21 Apr 2022

Rising tensions: Parties clash over inflation and spending

4:16 pm on 21 April 2022

Today's inflation rise cannot be blamed entirely on global effects, National's Christopher Luxon says, but the finance minister says tax cuts are not the answer.

- POOL - Photo by Mark Mitchell.  Finance Minister Grant Robertson during the post-Cabinet press conference with Prime Minister Jacinda Ardern and Energy Minister Megan Woods and, Parliament, Wellington. 14 March, 2022.  NZ Herald photograph by Mark Mitchell


Finance Minister Grant Robertson said the higher inflation was just a reminder of global economic challenges.

"There are short-term and long-term things we can do to help New Zealanders through this but fundamentally this remains an inflation situation that's driven by global factors," he said.

"If people have got criticism of our spending, by all means let's debate that but when it comes to inflation per se, we need to be careful, we need to be balanced. That's what we've been over the whole four years we've been in government."

He said the government had saved a billion dollars in its last Budget, and looked for cost savings every day.

Untargeted tax cuts were not the answer, he said.

"We have to balance a number of different considerations - both what's happening in the short term but also the longer term, things that will support New Zealanders. That means a properly functioning health system, that means investing in transport and infrastructure."

"There's no free lunch here ... If the National party is saying that, what are they going to cut? Are they not going to make sure that New Zealanders can receive health services wherever they live in New Zealand that are of high quality, and that they would prefer tax cuts for people that are earning more than $180,000? That's a debate but there isn't a free lunch here."

He said if the government had not stepped in and reduced fuel excise and road user charges, inflation would have been even higher.

The Reserve Bank was using the tools at its disposal to keep inflation down, he said, and the government in turn would make sure its spending was targeted and careful.

"We'll focus on making sure that we have a properly functioning health system, education system, that we're building houses and our priority is not tax cuts for the most wealthy. That's the wrong thing to be doing right now."

He said unemployment was at a record low, exports were up, and the economy was growing and helping keep a lid on debt, which was well below those of countries New Zealand compared itself with.

"What I'm not prepared to do ... is austerity policies that would suddenly cut spending on health or education, and that's what the National Party has to answer."

'Inevitably ... there will be wasteful spending' - National

National Party leader Christopher Luxon however said the inflation could not be blamed entirely on overseas factors.

"We have got much higher levels of inflation than our trading partners and importantly also domestic inflation's at a record high and that is what government can control ... there's three things we need to do: not pass costs on to business, rein in spending and make sure it's not being wasted on things that aren't useful, and importantly remove bottlenecks for business like immigration and supply shortages."

He said the government had lost financial discipline.

"Inevitably, in a government that's increased government spending tremendously over the last four years, about to add another $6 billion, the biggest in the history, ever of New Zealand - there will be wasteful spending in all of that."

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Christopher Luxon (file photo) Photo: RNZ / Samuel Rillstone

Robertson should be doing what households across the country would be doing, and what his finance spokesperson Nicola Willis would do, Luxon said.

"Directing every minister of every department to go through line by line, to make sure that we're stopping the money being spent on wasteful programmes - programmes that aren't having an impact, aren't getting results."

He gave the examples of the $100 million subsidising the Te Huia train service, and the $29b spent on light rail in Auckland.

"We've got to reprioritise our spending, bring in discipline, each year think about the things that have been working, say we want to do more of that, the things that aren't working we want to do a lot less of that.

"We're not talking about cutting services or having austerity, what we're saying is let's be really thoughtful and intentional about that."

He acknowledged inflation would disproportionately affect low-income households, but said it was also affecting the squeezed middle.

"These are people that earn $55,000 to $70,000 a year living in a city like this, in Auckland - you're not a rich person ... they are doing it incredibly tough because if you've got a $700,000 mortgage, over the last year your interest cost just went up $8000. If you rent, it's up $150 a week.

"If you care deeply about vulnerable people who will be more impacted, you care even more so to make sure the finances are in good shape because if you don't you have to make tougher decisions down the road that could cut services that you desperately want to not cut."

'We need to get on top of it' - ACT

ACT leader David Seymour said the figures were the direct result of "Labour's addiction to borrowing and spending" and the government's refusal to take responsibility was "giving the middle finger to middle New Zealand".

"Everyone already knew this result because they felt it whenever they went to buy something. It shows Labour went all out on Covid, forgot its other priorities, now we're drowning in an ocean of printed money."

He said New Zealanders needed tax relief, and called for the government to reduce the middle-income rate from 30 percent to 17.5 percent.

David Seymour

David Seymour (file photo) Photo: RNZ / Angus Dreaver

"This is without exaggeration the worst financial problem that households have faced in 30 years. We need to get on top of it.

"Even the Reserve Bank governor is saying we have to pull back on government spending ... if we went back to the number of bureaucrats we had in 2017 we'd save $2b straightaway."

He said the government also needed to pull back on Kāinga Ora's competition with the private sector.

'We need to keep going' - Greens

Green Party finance spokesperson Julie Anne Genter called for a suite of policies to ease the burden of inflation.

"Lifting benefits, Working for Families, introducing rent controls to limit rent increases to a reasonable amount, making public transport free, breaking up the supermarket duopoly.

"And there's longer-term investments that we can make to reduce our reliance on petrol in our transport system to invest in producing more sustainable building materials here in New Zealand so we aren't subject to those global headwinds."

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Julie Anne Genter (file photo) Photo: RNZ /Dom Thomas

She said tax cuts as proposed by National and ACT would be completely counterproductive, and was a predictable appeal to their base.

"It would put more inflationary pressures on our system but mostly it would create a less progressive and less fair tax system ... It looks like they want to cut essential government spending. The Green Party would say that we need to keep going."

She believed there was one area for potential cuts to wasteful spending.

"Big expensive motorway projects in the New Zealand upgrade programme which were meant to be shovel-ready fiscal stimulus and have actually driven a huge amount of inflation in the infrastructure/construction sector."

She said it was very clear the majority of the inflation was being pushed by global headwinds, and New Zealand's inflation was relatively in check compared with many others in the OECD.

'No room for those that are struggling' - Te Pāti Māori

Te Pāti Māori co-leader Debbie Ngarewa-Packer said those whānau who were struggling would be most affected.

"As they reprioritise their spending, their budgets ... they don't have the same room to manoeuvre budgets around, and they are the ones who feel the pinch the most," she said.

She warned the benefit increases brought in at the beginning of the month were simply catching up to previous inflation increases.

"They're addressing a situation that was dire, based on an inflation rate that existed up to the end of December ... there is no room for those that are struggling to manoeuvre out of this. So there needs to be more done and it needs to be able to address again the urgency of the situation that these whānau are contending with now."

The party supported the recommendations of the Child Poverty Action Group which called for a targeted approach, she said, and for Goods and Services Tax to be removed from food.

"Basic measures that could immediately put more money into the households of those that need it the most."

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Debbie Ngarewa-Packer (file photo) Photo: RNZ / Samuel Rillstone

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