Ruth Richardson, Finance Minister behind infamous 'Mother of all Budgets', not convinced Govt can rein in spending

Former Finance Minister Ruth Richardson, who spearheaded widespread Government spending cuts in the 1990s, fears Labour's upcoming Budget won't provide solutions for the state of New Zealand's economy.

Prime Minister Chris Hipkins on Thursday ruled out major tax changes and claimed a levy wasn't needed to pay for the damage caused by the recent Cyclone Gabrielle and Auckland floods.

In a speech, Hipkins declared the Budget will be "no frills" and reflect the tough economic times.

But Richardson, the former National Party Finance Minister who delivered the infamous 'Mother of all Budgets' in 1991 that included major benefit cuts and new user-pays requirements in hospitals and schools, believed Hipkins' pledge was too late. 

"I fear it's a going to be a 'no solutions' Budget," she told AM host Ryan Bridge on Friday.

"The spending horse has well and truly bolted, the inflation horse has well and truly bolted and to turn up 'Johnny come lately' and say, 'Oh, we're now going to be virtuous on spending and taxing' I don't think cuts it," Richardson said, referring to the Eagles hit 'New Kid in Town'.

Richardson, whose widely unpopular policies have been attributed to National nearly losing the election in 1993, urged the Government to put policies in place that "fires up the engine of our economy".

It comes after the latest consumer price index figures, revealed last week, showed annual inflation fell to 6.7 percent in the March quarter - a slower than expected number but still at the fastest pace since the 1990s. 

The Government's impact on inflation was highlighted in Treasury research earlier this month, which showed potential overspending at the height of the COVID-19 pandemic - to create more supply and demand - may have created the hangover effect currently affecting Kiwis. 

However, Prime Minister Chris Hipkins has defended such spending as necessary.

"The biggest component of the Government spending in question was the wage subsidy which kept people at work during COVID-19 and it also meant that businesses didn't end up going to the walls," he told AM last week. 

"In order for [the] Government to reduce spending and have a meaningful impact on inflation, you're talking billions of dollars that the Government would need to reduce its expenditure by."

Hipkins said he wasn't willing to "oversee that kind of austerity approach" as Prime Minister.

"Wherever we see areas we can reprioritise spending, that's something I'll absolutely be focused on."

Since Hipkins took office earlier this year, $1 billion in Government spending has already been cut.

However, Richardson said it was "too little, too late".

"The Prime Minister wants us to believe that the cloak has changed. In fact, the underlying economic setting is so hostile… that this Budget's not going to rescue it.

"I think that we have just over-egged that spending pudding, that we've had a dedication to 'public spending is the answer to our problems' and, clearly, it isn't."

Hipkins said the Budget to be unveiled next month would deliver "measures to support New Zealanders with the cost of living".

"As a Government we need to pull right back and ask the question - 'What things are going to make the biggest difference to New Zealand right now? What is going to help lift our productivity and wealth so we can keep investing in services like health and education? What are the handful of things that will help get us ahead and stay ahead?'

"So, I think it's worth the business community knowing that for me, my priority this Budget will be driving a focus on skills, science and infrastructure investment to grow our economy and make it more secure," Hipkins said in his Thursday speech.