National leader Christopher Luxon has hit out at the Government's spending in this year's Budget while skirting questions on how much National would have spend if it was in power.
It comes after a report shared by the National Party showed Treasury warned the Government before this year's Budget that spending more money than planned would increase interest rates, but they did it anyway.
Speaking with AM on Wednesday, Luxon said the report contradicts Prime Minister Jacinda Ardern and Finance Minister Grant Robertson's claims that inflation is mainly driven by overseas pressures.
"The Prime Minister and Grant Robertson have been saying, 'Don't worry, [about] inflation we have got nothing to do with it, there's no responsibility for it because essentially it's all imported from overseas'.
"What this report says is domestic inflation, which you can control through Government spending and other things, is actually what's driving a lot of our inflation.
"They've been blaming COVID and the war in Ukraine and there's a component of that international inflation. But what this said was if you overspend in your Budget, you're going to actually be increasing inflation."
The Budget Economic and Fiscal Update released on Budget day in May said inflation is "being driven by strong domestic demand pushing up against constrained supply, which in turn has been compounded by the Russian invasion of Ukraine".
In December 2021 the Government signalled it would spend an extra $6 billion in new operating spending for 2022. While the official Budget came in at $5.9 billion a year, just under the estimate, the Government also introduced multi-year funding packages that drew from the operating allowances of Budget 2023 and Budget 2024. Part of Budget 2022 also included a cost of living payment for Kiwis who earnt less than $70,000 over the last tax year and are not eligible for the Winter Energy Payment.
But Luxon told Ryan Bridge the Government shouldn't have introduced the support because it added to inflation. The Treasury documents said while direct payments like the cost of living payment and tax cuts do add to inflation, it's less than other Government spending.
Previously released Treasury advice on the cost of living payments said: "A broad-based one-off payment of this magnitude would add to inflationary pressures in the short-term, although the risk to longer-term inflationary pressures is relatively small assuming any interventions of this nature were temporary".
Luxon also defended his party's promise of tax cuts in the form of changing the income thresholds if it wins the election - despite the fact they have a similar inflationary impact as direct payments.
"Our argument as you remember over several months now has been, the cost of living crisis is going to be with us for some time, elevated levels of inflation will be with us for some time. A one-off payment for a three-month period of $27 a week, versus actually doing what we are saying, which is, 'Listen, let's just take the existing tax thresholds and adjust it by inflation and give that money back to New Zealand'.
Bridge then pointed out the tax cuts would cost $1.7 billion before asking how much National would have spent in this year's Budget if it was in power.
"The big point that they were trying to make to Grant Robertson before the Budget was, 'Listen you gave a headline number that you thought you would spend this year' and he went and massively overspent it."
When asked again how much he would have spent, Luxon avoided the question instead listing the projects he wouldn't have spent on, such as the health reforms.
Bridge said while that all sounded good, the National leader hadn't actually said how much he would have spent if he was in Government.
"I think you can tell that this is a Government that actually conflates spending announcements with actually getting outcomes and in the middle is something called delivery and implementation and execution and getting things done," Luxon responded. "And I think the New Zealand public understands that we know the economy well and we manage our finances incredibly well."
Bridge then asked whether he would commit to never spending if Treasury said it would add to inflation and inflation is above three percent?
"What I'm saying to you is since the first week of becoming leader, I've been saying, 'Hey, listen, there are some amber lights on the dashboard…"
Bridge then interrupted, asking again whether he would commit to "never spending if Treasury tells you it's going to add to inflation and inflation is over three percent, you won't spend it?"
"Intuitively we know that," Luxon replied.
"So that's a no?" Bridge asked.
"I know that actually Government spending and the way that the Government's been talking about it and doing it, they've put the accelerator on the economy…"
Bridge then jumped in asking again, "if you were in Government you wouldn't do that?"
"Intuitively I would sit there and say Government spending, domestic spending, you know, over the top spending like we've seen is actually driving inflation domestically."
"So you wouldn't do that?" Bridge clarified. To which Luxon said, "correct".
The Government has repeatedly denied claims its spending is to blame for increasing inflation. Figures from Statistics New Zealand showed annual inflation hit a whopping 6.9 percent in the March 2022 quarter, well above the Reserve Bank of New Zealand's mandate of between one to three percent on average.
Robertson has repeatedly blamed overseas factors for inflation such as the COVID-19 pandemic and war in Ukraine. It's also a view shared by Reserve Bank Governor Adrian Orr who previously said international factors are playing a much bigger role on inflation than Government spending.
When asked in May whether Government spending was to blame for inflation, Orr said that summary was "too simplistic" and incorrect.
New Zealand also isn't alone in experiencing high inflation, the United States, Australia, and the United Kingdom are all battling inflation increases as well.
