A Gabrielle rabbit in Grant Robertson’s hat?

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

Prime Minister Chris Hipkins may have moved quickly to extinguish any prospect of increased taxes in his major speech to Auckland businesspeople yesterday but he seems to have left one mystery — how to pay for Cyclone Gabrielle.

It’s no surprise that the key message of Hipkins’ speech to the Employers and Manufacturers Association was restraint as he clearly ruled out any more taxes or a dedicated cyclone recovery fund. Instead, the costs would be met by reprioritising existing spending and funding, and debt. A cost-of-living crisis was not the time to simply add to the Government programme and exacerbate inflation, he said.

That makes a challenge for the Budget three weeks from now, with the cyclone estimated to have cost the country $9 billion-$14.5bn.

At least one expert disagrees with the Government’s approach. Economist Cameron Bagrie said it had a real balancing act on its hands, with some big considerations beyond the election.

Labour needed to dial back spending to reduce inflation, provide cost-of-living support and drive the cyclone recovery. “How the hell are they going to balance that up?” he asked, saying that the sacrificial lamb could be borrowing more over the next two years.

Hipkins continued his theme that the Government of Jacinda Ardern tried to do too much at once, and the effect was that it was tied up with issues taking too much time and money away from where the primary focus needed to be.

He moved to counter National and Act’s criticism that the Government was a spendthrift, saying Treasury had pointed out that between now and 2024 government spending was set to fall by the largest amount since at least 1987 due in part to the rapid rollback of Covid spending.

“So, despite what you might hear from the Opposition, the fact is that government spending is tracking down towards the low 30s as a percentage of GDP and that is about where I would like it to settle.”

Hipkins also thanked the business sector for the way it had worked to keep costs down during the pandemic and cost-of-living crisis, and accepted they had no option but to increase some prices now.

National leader Christopher Luxon remained sceptical about promised fiscal restraint, saying four months out from the election Hipkins had all of a sudden discovered that being disciplined was important, when it had always been.

What is left now is for Finance Minister Grant Robertson to pull a rabbit out of the hat on May 18.