Three issues are currently top of voters’ minds: cost of living, crime and healthcare. All of these are, allegedly, key priorities for the government. None are going that well. The average household’s wealth has been going backwards for two years, the recent police victim statistics show an increase in violent crime, and health is a disaster on multiple fronts.
This quarter, the coalition has focused on crime: gang crackdowns, tougher sentencing, the Prime Minister riding around in police cars. Hopefully, at least one of these will have an impact. To offset the cost of living we’ve had our tax cuts – how was it for you? – and low-and middle-income families are now eligible for a subsidy to offset 25% of their early-childhood-care costs.
But the bigger economic picture is that there is no big picture: the government hopes that inflation goes down, that interest rates follow, that business confidence is sustained, that some of China’s stimulus package floats our way and that pre-pandemic economic conditions return.
Finance Minister Nicola Willis has ruled out a capital gains tax – and the government responded to various economists and bank executives endorsing such a scheme like a band of murderous chimpanzees defending their water hole, screeching and leaping and baring their teeth. But it is the solemn duty of National finance ministers to warn that this tax – some form of which is ubiquitous across wealthier nations – will somehow wreck our economy, just as it is the lot of Labour finance ministers to explain that taxing capital gains is vital to the coherence and fairness of the tax system but they’re still not going to do it.
Vague aspirations
What is unclear is what happens in lieu of fixing the tax system. A centre-right government might look to improve our eternally weak productivity, make our markets more competitive, increase exports as a share of GDP and increase international investment. But none of the targets the government has set speak to any deep economic concerns or ambitions, with the arguable exception of lowering the number of people on the Jobseeker benefit.
Instead, there is a vague aspiration that policy in some of the other ministerial portfolios will have economic benefits downstream: David Seymour’s Ministry for Regulation? Chris Bishop’s fast-track scheme? Isn’t there a review of science funding going on – maybe that’ll be a thing?
The challenges facing the Finance Minister were highlighted by a recent speech from Treasury’s chief economic adviser and the outraged public response to the government’s announcement to downgrade the completion of Dunedin’s new hospital.
Treasury cited healthcare for our ageing population as a massive driver of increased government spending, warning that a return to surplus will require cuts on a scale “unprecedented in recent history in New Zealand”.
Our health (and super-annuation) systems are rapidly becoming unaffordable. To fund them, the nation requires either strong, sustained economic growth, massive tax increases or extensive borrowing (which just pushes the problem out to subsequent generations).
Finance Minister Nicola Willis has ruled out a capital gains tax – and the government responded to various economists and bank executives endorsing such a scheme like a band of murderous chimpanzees defending their water hole, screeching and leaping and baring their teeth.
Broken promises
Labour’s plan is to borrow and to tax capital gains – and it is very hard to understand why income tax should carry the burden of these costs while capital gains are largely excluded.
But what is National’s plan? It looks like the plan is to cut. Dunedin Hospital is the government’s second broken promise in the health portfolio. The first was the failure to follow through on its pre-election promise to fund 13 additional cancer medications. That was swiftly reversed; this should be, too, and it is hard to imagine how they could make the same mistake twice.
National has made much of cost blowouts in Labour’s infrastructure projects, and Dunedin Hospital has been a fiasco. Original cost estimates somehow excluded carparks and a pathology lab; when finished, it will be the most expensive hospital in Australasia on a cost per metre basis, according to Infrastructure NZ chief executive Nick Leggett.
But National was ferocious in attacking Labour when Jacinda Ardern promised a swiftly built modern hospital then completely failed to deliver. When Labour cut back the scope of the rebuild, National’s then-health spokesman, now Minister, Shane Reti declared “the south deserves a hospital that will be fit for purpose for generations, not a patch-up job” and that “if elected in October, National will deliver all the beds, operating theatres, and radiology services that Labour removed”. And it did well out of this: an average 10% swing in the party vote across Dunedin’s urban electorates – pretty good for a historically red city.
Willis insists residents just need to be sensible; $3 billion is simply too much! It doesn’t help that the coalition’s policy of reinstating tax cuts for landlords cost $2.9b over four years. During Question Time, the opposition throws this number in the government’s face approximately once a minute.
The government’s healthcare policy will look like the Dunedin Hospital fiasco over and over again: sustained cuts and public outrage.
And this parsimony in health foregrounds the government’s delusional extravagance in transport infrastructure: billions for a proposed mega tunnel under Wellington; billions more for a highway from Petone to Grenada; a total $82.7b to be spent on transport, according to the Infrastructure Commission.
Governments get nervous when there are significant protest marches in cities that aren’t Wellington. The Dunedin march was awfully large. The hospital’s catchment area includes many traditionally blue seats. Nicola Willis will probably relent and generously allow the people of the south a place to park their cars.
But on the current economic and fiscal trajectory, the government’s healthcare policy will look like the Dunedin Hospital fiasco over and over again: sustained cuts and public outrage.
A few weeks back, Wellington Hospital cut back on offering toast to new mums on the pretext that it was “nutritionally suboptimal.” Reti made hospital managers give it back.
But the cost of all those pre-sliced loaves and pathology labs adds up, and unless Willis can find Reti a lot more money – and quickly – he’ll spend the rest of his turn in office cutting rather than buttering.
