Traders in financial markets have signalled they have no appetite for indebted governments taking out more debt to fund bold new initiatives when growth is slowing and they're meant to be fighting inflation.
Their reactions beg the question, how would tax cuts in New Zealand go down?
Income tax thresholds haven't been adjusted in a decade. People on relatively low incomes are finding themselves in high tax brackets. So, National is promising to lift income tax brackets.
It also wants to reverse all the tax changes made by the Labour-led Government. This includes removing the top tax rate of 39 per cent for income over $180,000, allowing residential property investors to once again deduct interest as an expense, taking the bright-line test back to two years, and removing the Auckland fuel tax.
However, over the past week it's been stressing it wants to wait and see what the economy looks like before putting a timeline on when it will enact these tax changes.
National's finance spokesperson Nicola Willis told the Herald: "We have committed to delivering tax reduction in our first term of government, although we have made no decisions about the fiscal years in which those reductions will occur. This will depend on the state of the books and the economy, including inflation and debt levels.
"Our first tax priority is to adjust tax thresholds to compensate for the corrosive effect of inflation which has pushed people into higher tax brackets. That programme is estimated to cost $1.7 billion a year."
This sum is equivalent to 0.5 per cent of gross domestic product (GDP) in the year to the June quarter.
National won't put a figure on how much all its other tax policies would cost, saying this will depend on when they're introduced and the economic conditions at the time.
The Herald estimates (based on government projections made when Labour introduced its various tax policies) all National's changes would cost nearly $3b a year once fully implemented.
This is equivalent to 0.8 per cent of GDP.
By contrast, the raft of tax cuts planned in the UK is expected to cost £44.8b once fully implemented in 2026/27. That's equivalent to 1.8 per cent of the UK's GDP in the year to the June quarter.
Furthermore, it's going to spend £60b on an energy package in 2022/23. This is equivalent to 2.5 per cent of GDP.
So, National leader Christopher Luxon was correct when he last week said his party's tax policy is different in scale and scope to that in the UK.
Nonetheless, at this stage it looks like National's tax cuts will be mostly funded by debt.
Asked to specify what spending National would cut to cover the costs, Willis only pointed to spending on the TVNZ-RNZ merger, which is expected to cost $327 million over three years.
"We are confident our tax plans can be delivered responsibly by stopping poorly prioritised Government projects such as the TVNZ-RNZ merger, driving more value from existing spending and reducing waste and back-room bureaucracy across the public service," she said.
Willis said the party would release a full fiscal plan closer to the election "that will respond directly to the economic and fiscal conditions at the time".
National will surely be able to identify additional spending cuts. The question is whether it could make $1.7b worth of savings a year, let alone around $3b.
The party's supporters will argue that leaving more money in people's pockets will enable them to spend and invest more, stimulating the economy and increasing the government's tax take.
True. But this argument might not be as valid, given National's tax policies will disproportionately benefit higher-income earners and property investors – people who are perhaps less likely to spend every additional dollar they can pocket, compared to low-income earners who have more unmet needs.
The other factor to consider is that while New Zealand has taken out a lot of debt in recent years, our government books are in good shape by international standards.
New Zealand's net government debt was worth 15 per cent of GDP in 2021, according to an internationally comparable measure used by the IMF. This was well below that of the UK at 84 per cent.
Credit rating agencies weren't fazed by Finance Minister Grant Robertson increasing the Government's annual operating allowance by a whopping $5.9b at this year's Budget.
A return to "normal" was in sight, with the Treasury forecasting a budget surplus by 2025.
ASB chief economist Nick Tuffley cautioned that something doesn't matter until it does – large government spend packages were accepted by financial markets, until conditions changed and they weren't in the UK.
Nonetheless, both National and Labour would need to become much more reckless to spook financial markets.
Of course, there's more to good governance than keeping financial markets happy.
The outcomes of tax and spending policies are what's important.
National has made a decent argument for adjusting tax thresholds for inflation, but it has more work to do putting forward an argument for why the country would benefit from tax cuts skewed in favour of the rich. It also needs to detail what the effects of broader spending cuts would be.
Labour, on the other hand, needs to prioritise its work programme to improve deliverability. Equally, it owes the public much more robust cost-benefit analysis.
New Zealand voters are more likely than financial markets to have a tantrum over misguided spending.
