Budget 2023 is inflationary, political commentator Barry Soper believes

  • 26/05/2023

A leading political journalist believes Budget 2023 is inflationary despite claims to the contrary from Finance Minister Grant Robertson and Reserve Bank (RBNZ) Governor Adrian Orr.

The Budget was released last week amid a cost of living crisis, with interest rates soaring on the back of sky-high inflation.

Earlier this week, the Official Cash Rate rose 25 basis points to 5.5 percent as part of the RBNZ's ongoing efforts to bring spiralling inflation - currently at 6.7 percent - under control.

The RBNZ thinks it could be the last hike but many economists are expecting further increases later in the year. 

Newstalk ZB's senior political correspondent Barry Soper said last week's Budget would add to the RBNZ's inflation challenge.

"The Budget, to me, is inflationary despite what Adrian Orr and certainly Grant Robertson said," Soper told AM on Friday. 

"If you pump money in the way this Government has pumped money into the economy… what happens? People spend more because they've got more in their pockets, you can't get around that."

Although the Government promised to trim and reprioritise money in last week's Budget, fiscal spending will be $9.4 billion higher over four years than predicted in December - and revenue will be $11b lower than forecast.

Soper believed immigration would also play a big part in the inflationary pressure. New Zealand recorded a net migration gain of more than 65,000 people in the year to March. 

However, some economists believe the arrival of more people into New Zealand could have a positive impact on inflation.

"On one side, you have more people who will be wanting to eat something, shop and live somewhere, use transportation and that can add to the infrastructure challenges," ASB chief economist Nick Tuffley told AM earlier this month. 

"Having said that, one of the really pressing challenges we've had over the last few years is a shortage of people. 

"So a really key thing looking ahead is going to be looking at, what does this mean for wage growth? Because if the wage growth starts to slow, that will help inflation slow and it will help the Reserve Bank eventually achieve its job - so [it's] really pivotal from that angle as well."