Finance Minister Nicola Willis says there is good reason for removing ACC's revenue and expenses from the government's opertaing balance. Photo: Samuel Rillstone / RNZ
The finance minister's new indicator for measuring the budget has led to accusations of creative accounting from opposition parties.
But the minister says including a long-term funded scheme in the government's short-term decision making process was not helping the government with its goal of getting the books back into shape.
Tuesday's half-year economic and fiscal update (HYEFU) came alongside an announcement from Nicola Willis that the government would adopt a new measure of the operating balance before gains and losses (OBEGAL).
Named OBEGALx, the new measure excludes revenue and expenses from the Accident Compensation Corporation (ACC).
Despite the new measure, the return to surplus is still not forecast until 2028-29, one year later than May's forecast. With ACC still included in OBEGAL, the deficit would last even longer.
Willis said there was good reason for removing ACC's revenue and expenses from OBEGAL.
Essentially, as a long-term levy-funded scheme, Willis does not believe ACC deficits or surpluses are relevant to the government's short-term tax and spending decisions.
"We were concerned that the self-funded nature of some entities would distract from really what the point of this intention is, which is to say 'are the government's spending and revenue decisions balanced over the short term?'," she said.
Treasury would continue to report the original OBEGAL - with ACC still included - in future forecasts and budgets. It did not support the new measure, over concerns about how it would be communicated.
The opposition has seized on that, accusing Willis of shifting the goalposts.
"She's adopting a measure entirely of her own creation in order to try and make the deteriorating financial situation that she has created look less bad than it is," Labour leader Chris Hipkins said.
"This appears to be an attempt at creative accounting, to make things appear better than they are, in terms of what the government's exploring there," said Green Party co-leader Chlöe Swarbrick.
Labour finance spokesperson Barbara Edmonds called for Willis to change tack and said there needs to be a plan for recovery, and not a plan for austerity.
She said examples of foreign governments that have issued austerity programmes have shown GDP does not grow.
"If you have a look at the budget policy statement, it continues to say there will be more spending cuts and there will be more to come in the future," she told Morning Report.
"So, she's only left $700 million available at her next budget to pay for everything outside of health."
Edmonds doubled down on her claim it is an example of austerity, and pointed to previous governments' debt trajectory.
"Not just Labour the last term, but you look at National, the government borrowed for crisis, for the GFC, for the Canterbury rebuild, for Covid, that's why governments have borrowed, she said.
"This government has borrowed for tax cuts, interests deductibility, tobacco tax breaks."
Instead, Edmonds wants to see continue investment house building programmes, hospital upgrades, and infrastructure, instead of borrowing for tax cuts.
"The cuts are never going to get us to surplus. That is the issue. Where she is spending the money, which again, is her choice, and the plan that she is trying to do for the last year, it is clearly not making productivity or making our economy grow," she said.
Willis told Morning Report the alternative to "spending wisely is burdening New Zealand and New Zealanders with a level of spending that is unsustainable."
She said the previous government threw care to the wind, and added more than $100 billion to debt, and drove spending, fuel prices and inflation.
That approach would not work anymore, Willis said, and instead she wants to drive growth.
Willis said she cannot control Treasury's forecast assumptions, which she said have changed since the election, but can control their response.
"The recession that we're are currently in started earlier and has been deeper and persisted longer that they had imagined."
Willis called for the need of fiscal consolidation in New Zealand.
"We have been making savings that other parties in parliament have just about every day, attacked, and said it's the wrong thing to be doing," she said.
"We're also working very hard to drive growth across the economy because we recognise for New Zealand to get out of this very challenging set of books, we are going to have to grow faster."
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