Government surplus should actually be a $30 billion deficit - Sir Roger Douglas

A former Finance Minister says if company directors did their accounts the way the Government does, they'd be in jail.

Sir Roger Douglas, the architect of the massive economic reforms of the 1980s dubbed 'Rogernomics', claims the recent cash surplus reported by the Government should actually be a $30 billion deficit.

"If you applied accrual accounting in the way they do in the private sector, then you would have to take in the debt for super and for healthcare for future retirees," he told Newshub Nation on Saturday morning.

"If you did that, it's well over $30 billion. If the private sector people kept their books like the Government, the directors would be in jail. My question is, why not the politicians?"

Accrual accounting was adopted by the Government in the 1980s during Sir Roger's stint as Finance Minister in the Fourth Labour Government. 

According to Treasury, under accrual accounting "the effects of transactions and other events must be recognised when they occur (and not as cash or its equivalent is received or paid)".

"Financial statements prepared on the accrual basis inform users not only of past transactions involving the payment and receipt of cash, but also of obligations to pay cash in the future and of resources that represent cash to be received in the future."

Sir Roger Douglas.
Sir Roger Douglas. Photo credit: Newshub Nation

With an ageing population, New Zealand's superannuation bill is expected to skyrocket in the coming decades. 

"I was the person who started the accrual process, and we should have an accrual system for superannuation and for health," said Sir Roger. "It's at least a $30 billion deficit - and that's where we should be spending the money, to futureproof that."

The $7.5 billion surplus was well ahead of expectation, but only about $4 billion of it was actual cash - the remainder the result of accounting processes. 

Associate economics professor Susan St John of the University of Auckland told Newshub Nation it doesn't matter how big the surplus is if it's not going to be used to help those struggling to make ends meet.

"There is money there. We've got a situation where there are families too poor to feed their children, we've got them queueing at food banks, we've got Christmas coming up, pressure on the NGO sector telling us that things are overwhelming in the demand that they're seeing. 

"This is a crisis. We should be dealing with that, not congratulating ourselves on having this extra money to store up for the future."

She said it's a "false economy" to save the money for a rainy day, as it'll just cost more.

"If you spend the money now, you are addressing the real problems. If you don't, you're going to have future social costs."

Susan St John.
Susan St John. Photo credit: Newshub Nation

Sir Roger said while he agrees there is too much inequality and poverty in New Zealand, "throwing money at it doesn't necessarily solve the problem".

"The disadvantaged, in my view at least, need the kind of help that puts people back on their feet, able to make a contribution and make gains for themselves by what they do. That is the package. 

"We've thrown money at it. John Key claimed to have the biggest increase in income for the disadvantaged. The Labour Party came in, they cancelled the tax cuts, gave it to the disadvantaged, and the disadvantaged are not any better off."

Inequality in New Zealand rose massively following Sir Roger's reforms of the 1980s, but has levelled off in recent years.

Newshub.

 

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