Finance Minister Grant Robertson blasted for 'loosening the purse strings'

National has blasted Grant Robertson after he announced the Government will lift its Crown debt target by 5 percent to have more financial flexibility. 

Robertson, the Finance Minister, announced in a pre-Budget speech that he would aim to keep net Crown debt at between 15 percent and 25 percent of gross domestic product (GDP) after 2021 to 2022. 

The Government has essentially set new debt guidelines for when the current Budget Responsibility Rules of reducing debt to 20 percent of GDP within five years, have finished. 

Robertson said: "Beyond the Budget Responsibility Rules, our fiscal intentions in this Budget will signal a shift to a net debt percentage range, rather than a single figure."

Amy Adams, National's finance spokesperson, said it's a "blunt admission the Government can't manage the books properly; it is not wriggle-room". 

"Grant Robertson has been backed into a corner by allowing the economy to slow, over promising and making poor spending choices. 

"Now, instead of a fixed target, Grant Robertson has lifted the debt limit by 5 percent. That loosens the purse strings by tens of billions of dollars."

Robertson said Treasury advised the Government to look at a range of 15 to 25 percent. Treasury currently forecasts net core Crown debt to reduce to 19.1 percent of GDP in 2021 to 2022. 

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

"This range is consistent with the Public Finance Act's requirement for fiscal prudence, but takes into account the need for the Government to be flexible so that it can respond to economic conditions."

He said it would allow the Government to take "well-considered actions" in the case of an economic recession, or where there are "high value investments that will drive future economic dividends".

When asked why he decided to introduce the new range, Robertson said: "If economic circumstances are a little different, it's good to have some flexibility." 

Adams labelled it an "admission of defeat from a Finance Minister who has repeatedly used these rules to give himself the appearance of being fiscally responsible". 

"This decision will mean billions of dollars more debt because the Government can't manage the books properly and wants to spend up on big wasteful promises in election year." 

She said the Government is now short of money after Prime Minister Jacinda Ardern dropped the prospect of a capital gains tax last month. 

National's finance spokesperson Amy Adams.
National's finance spokesperson Amy Adams. Photo credit: Newshub

"This is not about preparing for economic conditions - this is Grant giving himself tens of billions of dollars more debt. But more importantly, it's Grant backing down and breaking another commitment to New Zealand.

"Now he's saying, 'Forget what I promised in the campaign, forget my pretence of being fiscally responsible, we now can't pay for what we've said we're going to do, and so taxpayers are going to have to front it'."

What's National's solution?

Adams said National's view has always been that when economic conditions are good, the Government should be slowly paying down debt so there's headroom for when the financial shocks come.

"That's always been what's kept New Zealand out of trouble historically. Going into the [global financial crisis] and the earthquakes, we had very low debt to cater for New Zealanders though that time."

Adams wouldn't give a specific alternative but said National would be targeting a number under 20 percent. 

Robertson's announcement comes as economists are predicting the official cash rate (OCR) will fall even lower later this year, as the economy struggles to pick up pace.

The Government was urged to reconsider its Budget Responsibility Rules last year by New Zealand Educational Institute president Lynda Stuart, as a way to afford new pay deals being negotiated for teachers. 

Primary and secondary teachers from across the country will walk off the job on May 29 in what's expected to be the biggest industrial action ever taken by education providers in New Zealand.


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