From the NZ Treasury Pre Election Economic and Fiscal Report, which is a mandatory document prior to any election so that both the poltiical parties and the public have a sense of the current fiscal situation when proposing and costing policies going forward.
There is some very interesting information. The government assumes that our borders are closed for at least another year, and there will be a significant contraction.
I am linking to the document at the first quote, but won’t do so after that.
Our main economic forecasts include $58.5 billion of discretionary COVID-19 fiscalsupport over the forecast period, more than the $35 billion included in the main
Budget Economic and Fiscal Update (Budget Update).
Border restrictions are assumed to be lifted on 1 January 2022, with all international travel allowed from then. This forecast also allows for limited international travel to resume in mid-2021, reflecting the possible emergence of safe travel zones or a resumption in international education.
The initial economic impact of COVID-19, while still large, has been less severe than
anticipated in the Budget Update, with a faster-than-expected move down alert levels,
and high-frequency activity indicators suggesting activity has picked up sooner than
expected. Annual average GDP growth is now expected to fall to -3.1% in the
June 2020 quarter, compared to -4.6% forecast in the Budget Update. Despite this
improvement, the forecast contraction in GDP of 16.0% in the June 2020 quarter will
far exceed previous records.
And the government has spent like a drunken sailor, running a significant deficit.
Total core Crown tax revenue fell in the 2019/20 fiscal year and this trend is expected
to continue over the next two years, primarily owing to the economic slowdown. The tax
revenue forecasts then start to recover as economic activity starts to pick up.
Compared to the Budget Update, the fall in tax revenue in 2019/20 and 2020/21 is
smaller, with core Crown tax revenue falling to $84.7 billion in 2020/21 (Budget Update: $80.1 billion), and the recovery is slower over the remainder of the forecast period.
Core Crown expenses have significantly increased in the 2019/20 fiscal year as a
result of the Government’s COVID-19 fiscal support measures. It is expected that core
Crown expenses will continue to increase in the 2020/21 fiscal year, reaching
$119.5 billion, then reduce as the Government’s COVID-19 temporary fiscal support
measures fall away
There are clearly assumptions about resumption of growth in this document. Treasury is fill of economists and wonks, but it is in Wellington and it tends to see things as from the capital. I count the number of shops that are closed and listen to Kea, who talks to the people who refer her clients. They are running scared.
I hope Treasury is right. But I don’t see that: I see a marked contraction continuing as we remain socially isolated and regulated.
David Farrar thinks I am optimistic.
So this is the status quo – an endless deficit, debt over 50% of GDP and unemployment remaining over 5% for seven years.
ACT (Fiscally responsible progressive promethians) add:
“It’s not good enough for us to kick the can down the road. We need an honest conversation now about our out-of-control spending and debt.
“Every other political party is now in a race to spend even more taxpayer money. Every vote for ACT is a vote for lower debt, less tax and a faster recovery. Only ACT has a fully costed plan to get back to surplus and start repaying the debt now.
“When it comes to economic growth and unemployment, PREFU presents a game of two halves. The Government has pumped up the economy in the short-term by spending $11.7 million an hour, but growth and unemployment figures are now worse.
“When the Government says the situation has improved in the short term, it is cherry-picking. In every single quarter Q2 2021, economic growth and unemployment is forecast to be worse than it was in May.
“The Government will blame this on the international outlook, but, as ACT has been saying for some time, Treasury’s alternative scenarios show that if we have a smarter health response to Covid-19, we can have higher growth, lower unemployment and less debt.
“Our roadmap to recovery ultimately depends how long we have restrictions in place.
Well, it looks bad.