Labour’s Chris Hipkins and National’s Christopher Luxon, the front-runners of the impending government, will need to exercise financial restraint, as suggested by the recent government financial reports. The forthcoming administration is facing hefty economic dilemmas if they aspire to restore the nation’s financial state into a surplus.
Today, the Treasury published the Pre-election Economic Fiscal Update (Prefu), revealing no recessions in sight and the possibility of accruing a surplus by 2027. Nevertheless, the journey towards these predicted surpluses teems with continual deficits, envisaging further borrowing and augmented debt.
The projected surpluses hinge primarily on the existing Government’s committed expenditure within the forecasting period, extending no regard to any potential election promises effective post the transition of the subsequent government.
Offering her insights on ‘On the Campaign’, the election podcast for NZ Herald, Jenee Tibshraeny, the Wellington business editor, explained the problematic situation this update puts the contesting parties in.
She asserts, “Fundamentally, these forecasts signify exceedingly limited financial flexibility for the parties. The coffers are bare.”
Tibshraeny mused that according to the predictions, if the economy flourishes without any unforeseen eventualities, then despite the grim forecast, the nation is on track to attain the surplus, albeit a year later than initially proposed.
However, sharing her concerns, Tibshraeny adds, “My apprehension is the potential downfall if things veer off the predicted course. If we encounter an unsavoury global economic climate, or if the succeeding government decides to enhance expenditure, or in case of any natural catastrophes like another cyclone, then the country’s financial state could worsen significantly.”
In Tibshraeny’s perspective, “there are no free lunches here” – signifying a balance or a trade-off is inevitable. The upcoming government, be it under Labour or National leadership, will need to juggle their commitments and deliver their promises prudently.
Adding to the episode, Adam Pearse, Herald’s correspondent, recounted an unexpected visit from the Taxpayers’ Union and their debt clock at a placard event involving National’s Christopher Luxon earlier this morning.