Labour kicks off the fiscal credibility battle today with the release of its fiscal plan.
National is expected to follow, possibly as soon as Thursday, with its own plan, which may (or may not) address the large hole that the problems with its foreign buyers’ ban might open up.
It has more problems with the ban, with NZ First confirming last night they would not support any relaxation of the ban on foreign buyers while polling showed a majority of New Zealanders did not believe it could pay for tax cuts.
At the same time, finance spokesperson Nicola Willis yesterday softened her rhetoric about the scale and timing for cutting government spending.
In doing so she is beginning to sound more like Bill English than David Seymour.
However, Labour’s plan today will be set against a strong critique of its economic management yesterday by the New Zealand Initiative.
And poll results from the Auckland Central electorate last night showed that, yet again, the swing from Labour to National is between 15 and 17 per cent.
But what will worry National is that ACT is sagging; the party vote in the Taxpayers’ Union – Curia poll showed party cote support for ACT in Auckland Central to be only seven per cent.
That is nearly what it got in 2020, and its Auckland Central support tends to match its overall national numbers.
Thus, the poll indicates that the party is slumping from its highs of above 10 per cent as recently as a month ago.
This would tend to confirm the reality that National is going to need NZ First as well as ACT to form a government.
And that will bring its own problems on tax and spending issues.
The poll also showed that 53.8 per cent of those polled do not believe National can pay for its tax cuts, and 29.4 per cent of National voters agreed.
NZ First deputy leader Shane Jones offered little consolation to National during a TVOne Maori issues debate last night when he addressed Naitonal’s proposal to lift the foreign house buyers ban on properties worth more than $2 million.
“The only thing that we’re going to see is an escalation in house prices because if you take an exemption and let foreigners buy more of our houses, it’s going to inflate the value of houses,” he said.
National leader Christopher Luxon yesterday almost sounded like he had a plan b if the foreign buyers’ tax did not deliver the funds it needs for its tax cuts.
“The point is that we have also built in huge amounts of buffer in our assumptions around our tax plan,” he said.
“We have built buffer into our fiscal plan as well.
“And so I am very confident we will deliver low and middle-income tax relief.”
And he is now talking about other taxes that might produce the revenue he will need.
“I think when you talk to New Zealanders and say we’re going to tax some wealthy foreigners coming to New Zealand, buying luxury homes and a 15% tax., that’s all good,” he said.
“But the good thing is that we’ve also identified many other revenue sources as well as also savings.”
But even with savings, he will have problems with his potential governmental partners.
Central to ACT’s government savings policy is a pledge to abolish several government departments, including the Ministry of Maori Development.
But on the TVOne Kaupapa Maori debate last night, National’s Maori Development spokesperson, Tama Potaka, indicated his party would not agree to that.
Luxon was, however, insisting yesterday that his preference for government remained a coalition with ACT.
The big issue between the three potential coalition partners will be how much government spending to cut and when.
The New Zealand Initiative yesterday published a study by its director, Oliver Hartwich and senior fellow, Bryce Wilkinson, which looked at government expenditure.
“This fiscal year, Government operating spending is running at 33.5% of GDP. In December 2017, Treasury was forecasting it would be only 27.6 % of GDP,” they said.
“That difference of 6% of GDP is massive. The outcomes are poor, yet the calls to increase spending ever more are inexhaustible. Sanity requires much greater attention to value-for-money.”
National will need to display in their fiscal plan where they can credibly make cuts.
Luxon yesterday was promising they could do that.
“We’re going to be very responsible, prudent economic managers in this country,” he said.
“ That’s what has caused the problem and pain and suffering for New Zealanders.”
National’’ finance spokesperson, Nicola Willis was also talking yesterday about spending yesterday and was busy lowering expectations about how dramatic National might be when it publishes its fiscal plan.
“National knows that New Zealanders don’t expect us to fix Labour’s mess in year one,” she said.
She said the Key government had borrowed when it needed to support New Zealanders and then got the books back in order through sustained efforts to stop waste.
“National’s fiscal plan will commit us to doing that once again,” she said.
“We will move carefully, with hard heads, yes, but also with caring hearts.”
She committed to the tax cuts and top future funding for schools and hospitals.
But she is now talking about a “path” back to lower deficits rather than the “big bang” approach she appeared to talk about recently, as in the Queenstown economic debate.
“The next National Government will meet these pressing needs while also charting a path back to balanced books and debt reduction,” she said.
“Ours will be a steady path.
“National’s fiscal plan will deliver overdue tax reduction to working New Zealanders; prioritise funding for infrastructure and frontline services; fund a small set of new policy commitments, and leave significant buffers of unallocated spending for future frontline services.”
That sounds more like the thing Bill English might have said rather than what ACT might want.
Maybe New Zealand First’s handbrake might come in handy.