Budget 2023: Grant Robertson says he won't resign even if interest rates go up further

Grant Robertson won't resign if interest rates rise further, saying the Government can't "abandon" communities hit hard by Cyclone Gabrielle.

There are predictions the Finance Minister is on a collision course with the Reserve Bank and borrowers' mortgage rates could be the casualty, with inflation and the official cash rate (OCR) expected to stay higher for longer after Thursday's Budget.

Despite promising to trim and reprioritise money, Government spending will be $9.4 billion higher over four years than predicted in December and revenue will be $11b lower than forecast.

"The worry for me is that, for the first time since COVID, you've got the Government fiscal impulse… turned positive," Infometrics chief executive Brad Olsen told AM on Friday. "That does risk fuelling inflation and keeping [the] cost of living pressures higher for longer."

Westpac echoed that sentiment, saying the Budget was "more expansionary than signalled" previously. 

"As a result, the Budget will add to inflation pressures in the short term," the bank's economists said in a bulletin.

"Our view is that the OCR will need to rise to a peak of 6 percent, which implies more pressure on households' finances and downside risks for both spending and economic growth in Treasury's forecasts."

Asked on AM on Friday if he'd resign if those predictions came to fruition, Robertson said he wouldn't.

"The answer's no," he told host Ryan Bridge.

"I don't think it'd be helpful, at the moment, for the Minister of Finance to resign. What I think this Budget does is actually show a pathway where inflation does come down - the interest rate question that's raised in this Budget is about the weather events."

He asked: "Do we abandon the people in the Hawke's Bay? I don't think New Zealanders want us to do that.

"Therefore, we've had to act there - it does have an impact but it still comes out, at the end of this Budget, with both interest rates and inflation coming down."

Robertson insisted the $1.6 billion allocated for the recovery from Cyclone Gabrielle was necessary.

"We don't think we should trade that off against delivering health and education and we do still see inflation coming down."

The latest economic projections from Treasury, released alongside Thursday's Budget, had inflation coming in at 6.2 percent, down from the current 6.7 percent, before dropping to 4.2 percent in 2024.

"These are the numbers I have to work with," Robertson said. "There is very little discretionary spend in this Budget, it's mostly cost pressures so there's not going to be a whole lot of stuff committed to between now and the election."