Labour eyes smaller operating surpluses with $21.85 bln splurge
By Paul McBeth
Aug. 29 (BusinessDesk) - The Labour Party will run smaller operating surpluses over the next five years and take on a higher level of debt to pay for $21.85 billion of extra spending to revive what it claims is a run down public service and bring forward its three free years of tertiary education.
Finance spokesman Grant Robertson today unveiled Labour's updated alternative fiscal plan to incorporate the latest Treasury projections, which would see a Labour-led government spend an extra $5.17 billion on social security including increased Working for Families transfers, an additional $7.92 billion on health and $6.2 billion on education through to the 2021/22 financial year.
To help cover the additional spending, Labour would ditch National's promised tax adjustments, extend the bright line test to tax capital gains on residential housing, aggressively target multinational corporate tax avoidance, and impose a tourist levy, which would cumulatively reap some $9.73 billion over the period. Labour would also take a slower path to cutting debt a proportion of the economy, with net debt peaking at $68.09 billion, or 21.9 percent of gross domestic product, in 2019/20, adding an additional $1.11 billion interest bill to the government over the horizon.
All up, Labour anticipates the operating balance before gains and losses (obegal) will stay in surplus over the next five financial years at $2.51 billion in the year ending June 30, 2018, rising to $6.56 billion by 2021. That compares to the Treasury's forecast of $2.87 billion in 2018 rising to $6.44 billion by 2021.
"The updated fiscal plan today confirms our priorities and our commitment to a credible and responsible management of the public finances," Robertson said in a statement. "Now that we've seen the government's books we've refined our plan to deliver a better deal for New Zealanders."
Last week the Treasury's pre-election economic and fiscal update showed a bigger operating surplus projected for the 2017 financial year, though that was largely erased by smaller gains in future years as economic growth hasn't been as robust as previously anticipated. Finance Minister and National campaign manager Steven Joyce said he didn't see any room for another families package until 2020, the time of the next general election.
The release coincides with Labour's tertiary education policy launch, bringing forward a staged introduction for three free years of post-secondary school education to 2018 and lifting student allowances by $50 a week. Those initiatives are projected to cost about $3.39 billion of the extra spending on education.
Labour leader Jacinda Adern said the changes will reduce student debt at a time when post-secondary school qualifications have become a necessity.
"If New Zealand is to be a wealthy, successful country in the 21st century we need more of our young people going on to universities, polytechnics, other tertiary providers, or industry training such as apprenticeships," she said. "Our commitment to life-long learning underlines the clear choice voters face this election – Labour believes in free education for everyone, and that’s what we’re working towards."
The Treasury's prefu shows the estimated number of funded places in tertiary education falling to 230,937 by 2021 from a projected 235,090 in 2017. At the same time, student loans, which are treated as an asset on the Crown's books, are projected to fall to $8.28 billion by 2021 from $9.2 billion in 2017.
Labour's alternative plan was vetted by consultancy BERL's economists, who said the projections were in line with the opposition party's stated aims to keep the obegal in surplus throughout the five-year horizon, reduce net debt to 20 percent of GDP by June 30, 2022, and restrict Crown spending to less than 30 percent of GDP during the period.
The plan would still resume immediate contributions to the New Zealand Superannuation Fund, which falls under Labour's $42.3 billion capital expenditure programme through the horizon. The proposed KiwiBuild programme, which would erect affordable homes to help ease the housing shortage, would cost about $2 billion.