Analysis: treasury predicting ‘broadly neutral’ impact

Finance Minister Nicola Willis says there needed to be a solution that was "value for money"....

Finance Minister Nicola Willis. Photo: RNZ

Treasury documents reveal that Nicola Willis’ first foray as Finance Minister will do little to address what she in Opposition ordained the "cost of living crisis".

Yesterday, Treasury issued its annual Half Year Economic and Fiscal Update (Hyefu), at the same time as Ms Willis’ so-called "mini-mini-mini-Budget".

As she predicted, it did not make pretty reading, although neither was it as apocalyptic as Ms Willis made out.

Essentially, Treasury said that the world economy is not in good shape, so it will take a bit longer than previously predicted for the government’s books to return to surplus.

Economic growth will not be as large as expected, inflation will take a bit longer to fall, interest rates will remain higher for a bit longer, and unemployment will rise a bit higher — Merry Christmas New Zealand.

Hyefu was prepared before the many minis Budget, but it does have a fascinating footnote which factors in Ms Willis’ shakey first steps as Finance Minister.

Taking Ms Willis’ much vaunted savings in government spending into account, but also factoring in the coalition government’s still unrevealed tax plan, Treasury expected that the overall impact would be "broadly neutral".

This is Treasury’s way of saying "your guess is as good as ours" and was leapt upon by Mr Robertson as proof that Ms Willis did not know how to pay for her promised tax cuts.

It means no such thing, but it does mean that Ms Willis and Prime Minister Christopher Luxon have allowed themselves a little more time before deciding how far and how fast tax policy will be changed.

On the evidence of Hyefu, do not expect any big changes.

Ms Willis promised in Parliament yesterday that tax relief would come next year, although she would be no more specific than that.

Mind you she also, unfortunately, asserted that "what New Zealanders care about is the size of the sausage not how it’s delivered."

Overlooking her regrettable innuendo, New Zealanders on a budget Christmas would care very much about about size and delivery when it comes to tax relief and nothing yesterday left them any the wiser when it might come.