Why more economic and social pain is coming for us all

National are backing themselves into a corner, and we will pay for it.

TLDR: Public service budgets and jobs will continue to get deeper cuts, driven by National’s self-imposed and increasingly hard to balance budget tightrope . And as their budget gets more constrained, you will see them become more desperate. This is bad news for our public services which is where the government is most likely to flex for its shortfall. The state of play means the government is going to be relying largely on private money for investment and economic stimulation. Not a surprise, but not a sure thing for NZ either - especially as corporates exact a price, and the government’s actions continue to increase state costs, and reduce government income.

Still, the $12bn of borrowings for tax cuts has them in a corner. And we’ll see those impacts continue to play out, which in turn will continue to hurt our economy and public services.

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The public service beatings will continue, and by extension, economic and social beatings for us all

The myth that wasn’t so

When Willis was budgeting for her $14bn package of tax cuts for landlords, the middle class, wealthy etc., she promised NZ she would not borrow* for it. Instead, most would come from culling the Labour government’s “wasteful” activities, slashing public service jobs, and reducing beneficiary incomes (i.e changing indexation from wage growth to inflation).

It turned out that she couldn’t find too much fat - only insignifcant-to-them things like food banks, budgeting services, NIWA, science investment, climate initatives, a lot of Maori related stuff like their health system and Matariki celebrations, social services, mental health, disability funding - you get the picture.

So despite denying she was borrowing right up until budget day, she ended up adding $12bn of borrowing - to pay for tax cuts of course.

[*Note: The only time Willis openly admitted she was borrowing was during a Select Committee process in March where she admitted, for the first time, “Yes, we will be borrowing”. Once outside that forum - including in April and May 2024, Willis continued to deny she was borrowing for the budget. Is that one message for the political committees, and another for the public?]