Budget 2022: Economist Cameron Bagrie not convinced Finance Minister Grant Robertson will rein in spending in 2023

A leading economist is not convinced Finance Minister Grant Robertson will keep his promise of reining in Government spending following the 2022 Budget. 

Robertson will deliver this year's Budget on May 19, where he will unveil $6 billion of new Government spending.

Independent economist Cameron Bagrie told AM on Tuesday the projection for the 2023 Budget is $4 billion of new spending while the 2024 Budget is $3 billion.

"Now that is a big step down from what we have seen with the 2022 Budget and that's prudent," he told AM host Melissa Chan-Green. 

"We have deployed all the big toys in response to COVID, the fiscal stance, the amount of money being pumped into the economy was pretty aggressive and pretty large."

Bagrie is urging the Government to show a "lot more prudence" to tame inflation which is hitting people's wallets. 

The latest Consumer Price Index (CPI) figures revealed on Thursday showed annual inflation hit 6.9 percent in the March quarter - the largest year-on-year increase in nearly 32 years.

With New Zealand experiencing a cost of living crisis, Kiwis have on average spent an extra $4000-$5000 in the past 12 months on basics including food, rent and fuel. 

Robertson defended the Government's spending, especially from the COVID fund where $52m went to horse racing, $87m for internet modems for students and $374m on arts grants including $17m on art therapy.

He told AM on Tuesday that he believes all that money was well spent.   

"If we pick up a couple of things you mentioned, the modems was to make sure children could learn from home where they did not have the internet in place. That was a really important thing to do in COVID that also has a long term benefit," Robertson told AM host Ryan Bridge.  

"The arts grant, the work for our artiest in New Zealand dried up when COVID hit and it's been a real struggle since then and that kind of support actually kept artiest in work." 

Robertson said at the start of the pandemic, he had a Treasury report, which said New Zealand was going to have 10 percent unemployment. 

"We said we weren't willing to put up with that and I am proud of our 3.2 percent [unemployment rate] result. I am proud of 5 percent average growth," he told AM. 

"I know it's tough at the moment for people and we go through our spending every Budget to make sure it's value for money and I think New Zealanders are well served by the approach we have taken."

Finance Minister Grant Robertson.
Finance Minister Grant Robertson. Photo credit: AM

Bagrie said looking at previous promises made by the Government on reining in spending on the Budget, he isn't confident that will happen in 2023. 

"This goes back to the 2018 Budget where the 2019 Budget was supposed to be a smaller spending affair than 2018 one, well the 2019 one was bigger. The same thing was said in 2019 about 2020 and 2021 was bigger and it goes on and on," he said. 

"Now, those look a real stretch when I look at the tendency over the past four years is for Budget spending affairs to be far bigger packages as opposed to smaller packages and this is the challenge going forward."

Bagrie said if the Government wants to keep to its predictions of just a $4 billion boost to the Budget in 2023, it will involve "pretty hard choices and trade-offs".

"It will be incredibly tight given that Government spending is well in excess of $100 billion every year, that doesn't leave an awful lot of wiggle-room for too many fun initiatives out there," Bagrie told AM. 

"It's pretty easy to spend money when the economy needs it in the response to the likes of COVID but the real test for any Finance Minister I think is whether they can rein things in on the other side and make the real tough choices when we need it."

Cameron Bagrie.
Cameron Bagrie. Photo credit: AM

Robertson said the Budget he will unveil on May 19, will deliver the services Kiwis need. 

"They need strong health services, they need good schools, they want to see good transport networks… All of those things are important," he told AM. 

"We've also got to be planning for the future so we are not so reliant on the things where we are seeing inflation, be that the use of oil or making sure we have better prices at the supermarkets."

Robertson said the Budget will focus on the long term issues that will help New Zealand's economy grow. 

"A core focus of this budget will be resetting our health system, making sure that New Zealanders actually get good quality healthcare wherever they live, whoever they are," he said. 

"Making sure that we've got a focus on those long term issues that will help New Zealand's economy grow, getting on top of climate change and making sure we do the basics right. We are very well aware of the pressure on households."

Watch the full interview with Cameron Bagrie above.