Finance minister Grant Robertson was back in Parliament yesterday, ready to celebrate five years as Finance Minister and after finance meetings in the United States with a cautiously optimistic view of the New Zealand economy.
He even went as far as to sympathise with those who want inflation adjusted tax cuts and emphasised that Labour had yet to develop its tax policy for the next election campaign.
That might be a hint that it could end up matching ACT, National and NZ First on inflation adjusted tax thresholds.
This is despite a run of pessimistic forecasts from bank economists suggesting that as far as New Zealand was concerned, the worst was yet to come.
”I knew heading into the meetings in Washington that the global economic outlook was sobering,” he said yesterday, standing in for the Prime Minister at the post-Cabinet media conference.
‘This was confirmed by the IMF in its latest set of forecasts.”
Robertson said more than a third of the global economy was projected to contract this year or next.
“The mood at the meetings was relatively downbeat,” he said.
“Much of the discussion revolved around the reaction of the financial markets to the UK’s mini-budget, the energy crisis in Europe, the US and China relationship, and the state of globalisation in an increasingly polarised world.
“New Zealand’s prospects are very much tied to events overseas, and there will be impacts on our economic prospects from what has happened globally.
“But I remain convinced that New Zealand is as well-placed as any other country to deal with what will be a difficult year ahead.
“A record number of New Zealanders are in paid work.
“We produce goods and services the world wants.
“Our books are among the world’s best, with debt levels well below those of our peers.
“And we are among a small number of countries with some of the best credit ratings in the world.”
Maybe.
But Opposition Finance spokesperson Nicola Willis doesn’t see it that way.
In a series of questions in Parliament yesterday, she wanted to know why Robertson supported a median wage earner paying more income tax than they were when Labour came to Government and whether he thought he was getting the balance right when his Government increased Government spending by 16 per cent in the past year while real wages declined by 3.7 per cent?
That is the political challenge for Robertson.
The books may look good, and we may be doing better than many other countries, but National is going to focus on what is actually in people’s pay packets.
They may need to look no further than Australia for inspiration, where the Treasurer, Jim Chalmers, last night, in a mini-Budget, announced a series of moves designed to increase wages for Australians.
If there’s one fact that sums up nearly a decade of wasted opportunities and warped priorities, it is this: real wages are lower today than they were ten years ago,” Chalmers said.
So he announced that the Government would support a pay rise for about 2.7 million workers on the minimum and award wages, the majority of them women, along with a wage increase for aged care workers, again mostly women.
And he said the Government would make it easier for parents to earn more with cheaper child care.
It would also train more people for higher-wage work; invest in industries that create secure, well-paid jobs. And fix “the broken (wage) bargaining system.”
As part of the training workers’ proposal, he announced 180,000 fees-free places at TAFEs (Australian equivalents to our Polytechs), which would eventually build to 500,000 free places.
Unlike Robertson, Chalmers is not shy about running up a large fiscal deficit.
He is projecting that to be $A36.9 billion over the next year compared with Robertson’s projection of $NZ6.6 billion.
Robertson is a close friend of Chalmers, and it may be a coincidence, but the New Zealand Minister was also talking yesterday about a possible rise in the minimum wage.
“You’ve seen consistently that we have looked at the minimum wage,” he said.
“We do understand the importance of making sure that those on low and middle incomes in New Zealand continue to be able to meet their living costs.
“So we’ll make that announcement when the decision is made.
“But our track record has been to increase the minimum wage consistently.”
Both ACT and National — and now NZFirst also – will go into next year’s election promising to raise tax thresholds to adjust them for inflation.
That will have the effect of improving workers’ take-home pay.
Robertson has yet to come up with a really effective counter to the argument for the tax proposals.
On Newshub’s “AM” show yesterday, he appeared to concede the attraction of the three Opposition parties’ arguments.
“Every Government would want to be able to adjust those tax brackets and make sure that people do keep more of that money in their take-home pay,” he said.
“We have to balance that against all of the needs we’ve got in delivering the health system that you’ve just been talking about, delivering education, building houses, making sure that we provide all the public services people rely on.
“So we’ll take a look at that as we move into the next period and we look at our policies for the next election.
“But it’s always a balance.”
Robertson emphasised that Labour was unlikely to do anything before the next election.
But then?
“I absolutely understand that people look at this, they see their wages go up, and they want to know what we’re going to do.
“We’ll have a clear policy for them for the election.”
That is about as broad a hint as Robertson could give that Labour will go into the next election with a policy to address bracket creep; the only difference between Labour and National is that he will not drop the top tax rate.
By not allowing tax cuts for the rich, Robertson will try to compare Christopher Luxon and Nicola Willis to Liz Truss in Britain and the economic chaos that followed her tax cuts for the rich.
