Hey Robbo, if you are explaining, you’re losing

(Photo by Hagen Hopkins/Getty Images)

Grant Robertson is at pains to explain that despite the government?s over blown spending promises he is somehow going to have the cash to pay for it all.

Grant Robertson calls it his “anchor”; a target which not only prepares New Zealand for some unknown future shock, it imposes discipline on a socially progressive government.

While he was Opposition finance spokesman, Robertson committed to reducing New Zealand’s net debt (total Crown debt less assets such as the NZ Super Fund) to 20 per cent of gross domestic product (in simple terms, total annual output of the economy), over five years.

With high household debt, the risk of earthquake and an economy which is still prone to the effects of international turmoil, Robertson agrees New Zealand needs low Crown debt (and 20 per cent is low).?But the target is also about Labour proving it can be disciplined.??

“The goals I’ve set myself as Finance Minister…are to be able to run a tight responsible?fiscal management approach whilst making the investments that we think are necessary to lift New Zealanders’ well-being.”

The target gets its first major test on Thursday when Treasury and the new Finance Minister publishes the half year economic and fiscal update (HYEFU), effectively a half-year scorecard for the Crown’s accounts.

While the debt target may seem modest – at the end of the financial year debt is forecast to be less than 23 per cent of GDP – it has already attracted skepticism from financial markets, and mocking from his opponents.

So, the government books were already heading in the right direction and Robbo is going to try and claim it was all him.

As well as making significant spending promises, from free tertiary education fees and extended paid parental leave to electricity subsidies for beneficiaries and superannuitants, Labour has ruled out revenue generating income tax increases (although it is cancelling National’s tax cuts).

Labour are going to cancel those tax cuts this week. That means many households are going to be taxed more than a $1000 per annum than if National was in government. That is a tax increase no matter how Robbo dresses it up.

Robertson’s plan was also developed?on the basis of Labour’s promises alone; he?now needs to find the money to pay for concessions made to get NZ First and the Green Party into Government.

Economists at ANZ said in a note that Robertson had left himself with little “wriggle room” and the debt target may slip over time.

ANZ’s Philip Borkin said net debt could end up being 22-24 per cent in 2022, adding however that the argument was over a “degree of excellence” with New Zealand’s debt still low by international standards.

But?Robertson maintains he is “very confident” the target can be met.

“We have the money to meet the plan, to meet the commitments we’ve made,” Robertson said.

“I’ve never denied that when you put together our plans, and those of our coalition partners, we have to be disciplined to meet those.

“It’s ambitious, it’s a big programme. Mr Joyce [National’s finance spokesman Steven Joyce]?likes to say ‘there’s 51 new initiatives in the programme’. It’s ambitious, and therefore we have to be disciplined in our overall spending track, but we have the money to do the plan we have put in place.”

Although Ministers have been charged with looking for areas of spending which do not fit the new Government’s priorities, Robertson played down the idea of surprise cuts.

Instead, he signalled that the issue could be one of juggling the timing of initiatives, with a degree of “phasing” the delivery of commitments.

“There are some commitments that we’re noting in particular in the capital spending area in particular that will mean the journey to do that 20 per cent will reflect the needs that we’ve got at a particular time.”

Labour could have avoided some of that capital spending if they embraces PPP solutions. They won’t though as they are ideologically opposed to such sensible funding structures.

This all sounds rather too much like explaining from Robertson, and as readers all know, explaining is losing.