Economist Cameron Bagrie sounds warning over how National, Labour will fund election promises

  • 05/09/2023

Whichever party is voted into Government in October is being warned "there's not a lot of wriggle room" financially to honour the election promises they are making. 

Better infrastructure, law and order, education and health are going to cost a fortune - while Labour is promising to phase in free dental care for some and National wants tax cuts for the "squeezed middle". 

Independent economist Cameron Bagrie said Government spending allowances may have to be increased, which would be inflationary. 

"When you look at it on a percentage basis compared to top-down expenditure, there's not a lot of wriggle room to make the numbers add up," he told AM on Tuesday. 

"We're in that quandary: do we up those allowances which, of course, adds to inflation, adds to debt; or do we try to reshuffle the deck a little bit... [or] tax increases, are they actually on the table?" 

Regardless, Bagrie said the key for any future Government would be "getting bang for our buck". 

"How much money the Government's been putting into the economy has been pretty strong over the past few years - and that's stripping out the COVID story... Government is going to get increasingly difficult over the coming few years; the more the Government spends, the more that potentially adds to inflation. 

"All political parties want to maintain this concept of 'fiscal prudence' - not having debt move up too fast. But, at the same time, we've got real life problems on the ground regarding the likes of health care [and] New Zealand Superannuation." 

Labour has promised ahead of the election it would keep the Superannuation age at 65. At the same time, National was sticking with its policy of gradually increasing it to 67. 

Bagrie believed a serious debate was needed about the affordability of the scheme. 

"New Zealand Superannuation is, last financial year, $19.5 billion, in four years it's going to be 26.5 billion - an increase of $7 billion," he said. "Where's the debate on the affordability of that?" 

Watch the full video for more.