In today's email we look into Labour's fiscal plan.
1. $17 bln of spending, with more to come
Labour unveiled its fiscal plan with the Mitikulena family of doctors at their Kilbirnie medical centre yesterday to emphasise its focus on health spending rather than tax cuts.
The numbers were big ($8 billion on health) and they're set to get bigger after Treasury releases its Pre-Election Fiscal Update (PREFU) on August 23. It is expected to show there's potentially another $1.5 billion in the kitty for both the Government and Opposition to spend (or save) if they want.
Labour's plan to spend $17 billion over four years, stay in surplus and reduce net debt to 20 percent of GDP by 2021/22 (one year later than National) uses the same economic forecasts as those used by the Government in the May 25 Budget. Since then, Government revenues have been running ahead of those forecasts.
Labour is paying for the extra spending by forgoing National's tax cuts, which saves $8.3 billion over four years, and by not repaying $7.2 billion worth of debt. That slows the debt reduction track down to 20 percent of GDP by a year.
2. But there's much more to come
However, there will be plenty more spending announcements to come both before the September 23 election and after.
A big chunk (over $10 billion) of the extra spending also hasn't been allocated (mostly in health), and $800 million has been put aside in the first year to meet the as yet uncosted policy demands of New Zealand First and the Greens in any coalition deal.
Asked whether any extra surplus after August 23 would be used for debt repayment or spending, Labour Finance spokesman Grant Robertson indicated it would go on social spending.
"We are working on some plans at the moment around where that investment will go. I think everyone here is clear what our priorities are: there is major need in social services, health, education and housing," he said.
"We will continue to prioritise those, making sure people have the incomes they need to be able to live good and decent lives. They are the priorities we have put out: reducing inequality, reducing poverty and when the time comes, we will look at the sustainability of further spending in those areas."
Finance Minister and National Campaign Manager Steven Joyce criticised Labour's decision to not repay $7.2 billion of debt.
"It's a classic Labour tax and spend approach, but this is the wrong time to be building up debt. We need to be reducing debt now to be ready for the next rainy day," Joyce said.
“And the most telling aspect of the whole document is they’ve managed to put out 17 pages without referencing the importance of the economy once, yet no government initiatives are possible without a strong economy," he said.
Labour's budget is based on the same economic forecasts as the Government's Budget 2017 released in May.
See my full report on the fiscal plan and the reaction over at Newsroom Pro, where it was published first yesterday.
3. IRD's big day
All of these big spending plans will be dependent on IRD collecting upwards of $130 billion of taxes by 2021/22, mostly with its $1 billion new computer system and a lot fewer staff. That's up nearly $24 billion from this year.
No pressure guys...
IRD announced to staff yesterday afternoon the results of its consultation over its Business Transformation project that will see staff numbers drop from over 5,600 to around 3,700.
IRD said yesterday that 3,300 of its customer facing staff would all be offered new roles or confirmed straight into new roles. It is also creating 900 new roles, with fewer in management and more in specialist positions.
IRD said it had decided to push the implementation date for the restructure out to February 12 from January 1.
"That gives everyone a bit more time to get through Christmas and New Year but keeps us on track to get all of this in place in time for the implementation of Stage 2 of our transformation in April," IRD Commissioner Naomi Ferguson said.
The PSA said it had serious concerns about the restructure, which it said would reduce IRD staff numbers by 30 percent by 2020/21.
"Whether you call it ‘streamlining’ or ‘cost-cutting’, this plan could negatively affect our country’s ability to pursue tax avoidance and compliance, as well as making life much more difficult for ordinary people seeking tax advice from IR call centres," the PSA's Erin Polaczuk said.
4. Winston's bank inquiry
New Zealand Leader Winston Peters is calling for an Australian-style inquiry into New Zealand's banking system, and the big four Australian-owned banks in particular.
New Zealand First's website includes a campaign landing page calling on voters to sign a petition and: "Join me and take a stand against the foreign-owned banks."
"The big four Aussie banks are ripping our country off," Peters says on the page.
"This year, they are on track for yet more huge profits at New Zealand’s expense, taking $4 billion out of our economy. Over 90% of the banking sector in NZ is foreign-owned, largely by the big four Australian owned banks, ANZ, BNZ, Westpac and ASB," he says.
"These big banks are like a hole in the hull of the New Zealand economy. NZ First will conduct a review of the foreign-owned banks focusing on competition, how much tax they are paying and how we can grow our own New Zealand banking sector. It’s time someone stood up to the banks."
Peters also called in his speech on the weekend for Kiwibank to be granted the Government banking business that Westpac currently has.
In Australia, the issue of whether to hold a formal public inquiry into the banks is a much hotter political issue. Labor has called for an Inquiry and the Liberal-National Government has resisted, although it responded to the public clamour with a bank levy in this year's budget and the South Australian Government is also trying to impose a separate levy.
5. Numbers of the day:
150 basis points - The increase in capital requirements for the big four Australian banks announced yesterday by the Australian Prudential Regulation Authority (APRA).
This matters for us in New Zealand because those banks are the parents of our big four banks and the Reserve Bank is also considering lifting capital requirements. It is expected to move broadly in tandem with APRA, or even have slightly tougher capital requirements. That increases the cost of capital for banks and increases the pressure on them to put up interest rates, regardless of the Reserve Bank's moves in the Official Cash Rate.
53 percent - MBIE's Labour Inspectorate found 53 percent of kiwifruit contractors in the Bay of Plenty were in breach of minimum employment standards, including not providing employment agreements or paying the minimum wage.
"Almost all of the employers found in breach were using migrant labour, which is concerning because these are vulnerable people who may not fully know their rights and entitlements," Labour Inspectorate regional manager Kevin Finnegan said in the announcement of the results of the crackdown.
Up 0.5 percent - MBIE reported online job vacancies rose 0.5 percent in June from May and were up 10.6 percent from a year ago. The monthly job growth has softened in recent months from the average monthly growth seen since June 2015 of 0.9 percent.
6. While you were sleeping
Donald Trump's administration is scaling back its plans for a big corporate tax cut after this week's legislative defeat on healthcare reform. Many had banked on big corporate tax cuts and infrastructure spending to revive growth and inflation in the US economy. That has failed to eventuate. (New York Times)
7. Coming up...
The State Services Commission is scheduled to report back later today with its Inquiry into how convicted Ministry of Transport fraudster Joanne Harrison forced out whistleblowers. RNZ reported it understood the report the would vindicate the whistleblowers and criticise MOT's leadership at the time. That would include then CEO Martin Matthews, who is currently stood down from his role as Auditor General pending an inquiry into his suitability.
The fallout from the case has also damaged current CEO Peter Mersi, who said yesterday he had erred by allowing his department to dodge an OIA request on the case from outgoing Labour MP Sue Moroney. Benedict Collins' report has the details.
8. Two fun things
I love a good cartoon, so here's two.