Christopher Luxon. Photo: RNZ / Angus Dreaver
National leader Christopher Luxon is rubbishing any suggestion the party's tax cuts will be inflationary or are fiscally irresponsible.
On Morning Report, Luxon was presented with a list of economists who do not believe National's tax plan adds up. He initially laughed, before referring to the release of the Pre-Election Economic and Fiscal Update (PREFU) on Tuesday.
Deficits for the next two years have been increased as expenses outpace the growth in revenue, with a return to surplus now delayed another year until 2026/27. National's finance spokesperson Nicola Willis said Labour "had left the cupboard bare" with its poor economic management.
Luxon said the release of the documents showed the high cost of living would continue for longer alongside higher inflation and interest rates.
He disagreed with any assessment that National's tax plan would increase inflation and make interest rates worse.
"We have funded this through reprioritising savings, so it's coming from existing government spending, and we've also raised new revenue, particularly from foreign buyers and new immigrants wanting to come into New Zealand.
"That's a smart way of going about it."
When challenged that all of this would be inflationary, Luxon said National was confident in its policy.
"When 22 percent of your disposable income is tied up with your interest costs many Kiwis are either going to save that money or put it into their mortgage and/ or spend it, so there's going to be a mix of spending and saving which you don't get when the government is spending money."
He believed many New Zealanders would opt for using tax relief to pay off their mortgages, pay down debt or put it into savings because they could see uncertainty ahead for the economy.
"That is less inflationary than a government adding incremental money like we've seen in the last wee while and we continue to see and is a much better response and Treasury have made that same remark ..."
When Morning Report's Corin Dann pointed out that ACT was revising its election tax policy in light of what was revealed in the Treasury forecasts, including a $10 billion deficit, and perhaps National should consider doing the same, he replied: "That's rubbish."
Luxon said National had decided to opt for making savings and raise extra revenue to pay for its tax policy. "Our tax plan delivers and most importantly, it's going to deliver for the squeezed middle and working New Zealanders ... this is not radical."
Pressed again on whether it was fiscally responsible, given the $10b deficit, and would he consider changing course he said it had been funded so that it didn't drive inflation and could be delivered in the wake of any fiscal situation.
National's fiscal plan would be made available before the start of early voting. Asked if any other policies might be ditched or any other new policies would be announced, Luxon said National had been responsible and prudent with its economic management to this point and would continue taking that approach.
On health and education, spending would be increased at the rate of inflation for frontline services, however, it would not cover backroom services such as communications, he said.
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'We've been careful' - Willis
Nicola Willis. Photo: RNZ / Samuel Rillstone
National's finance spokesperson Nicola Willis said despite saying "the cupboard has been left bare" by Labour her party was confident it had shown restraint in what it was offering.
Its promised tax reduction could still be brought to bear because it would reprioritise spending and include new revenue sources.
"So we've been careful," she said, before accusing Labour of making large spending promises during the campaign.
Willis defended National plans to tax those who buy homes over $2 million and online gambling and use tax from the Emissions Trading Scheme to help pay for its tax cuts.
"Over these next few years it's going to be very very tight in New Zealand because Labour have spent so much during the good times that we now have an exploded debt figure."
It had gone from $5 billion in 2019 to $100b in 2025, she said.
She guaranteed National would spend less and borrow less - but it would not be at the expense of public services, because her party would ensure money was spent on frontline services.
She believed $595 million a year could be cut from the spending of 24 government departments, with policy advice, advertising and managers among the targets.
On immigration she said a careful eye would need to be kept on it, to ensure the country had the number of workers it needed for key sectors while still ensuring New Zealanders could get jobs.
Willis said National's fiscal plan would be released "in the next couple of weeks".
The Treasury forecasts in the plan released yesterday contained a number of risks that would need to be assessed against what National planned to do if it became the government.
"We want to review our plans and have an external assessor review them too, then finalise them and make them public."
She promised the kind of "prudence and frugality" that the current economic situation demanded.
