In today's email we look into what yesterday's PREFU means for the rest of the election campaign.
1. Tax cuts and hikes ruled out
Any hopes National could promise a second round of tax cuts in this election evaporated yesterday after Treasury revealed fewer fiscal 'lollies' in the jar than most expected.
The lack of fiscal headroom also forced Labour to remove any potential uncertainty about the need for a new higher tax threshold to fund further election campaign promises.
There had been some speculation that Labour Leader Jacinda Ardern might signal the need for more income tax if the Pre Election Fiscal Update (PREFU) did not provide enough lollies for an early delivery of Labour's free tertiary education pledge or higher student allowances.
Facing National's attacks about a lack of clarity on Labour's tax policy, Ardern chose yesterday to rule out any increase in the top personal tax rate.
Earlier, Treasury revealed a smaller-than-expected bonus from economic growth over the next four years, with a net improvement in the Budget surplus of $300 million over the next four years - much smaller than the $1.5 billion many had expected.
Treasury lowered its forecasts for economic growth slightly, largely because of lower than expected residential investment spending due to tighter bank lending and higher interest rates. Treasury sees the Reserve Bank tightening monetary policy about a year before the Reserve Bank's own forecasts.
National's campaign manager and Finance Minister Steven Joyce reacted by saying this meant the Government would not be able to announce another family incomes package of tax cuts before 2020 unless there was an improvement in economic conditions.
"The next opportunity (for a bigger family incomes package), unless economic conditions turn out to be significantly better, is in 2020," Joyce told a briefing for media to release the PREFU, which is released for all parties to cost their policies a month before the election.
"We want to stay on our debt track. We don't want to be borrowing for a family incomes package," he said.
Ardern also acknowledged the PREFU had not delivered as much extra room for new spending promises, but said that it had not affected the spending plans Labour had already announced.
She told reporters in Parliament Labour still expected to make future announcements around housing, education and health.
But she also said she had decided not to campaign for a new higher income tax rate, and that any Labour Government Tax Working Group would not look at introducing a new higher tax rate for high income earners.
2. An aggressively negative opposition
Newsroom's Shane Cowlishaw attended yesterday's Business New Zealand election conference and found opposition leaders in a combative and occasionally hostile mood.
New Zealand First MP Richard Prosser told the conference that electricity company shareholders should sell their shares now because a New Zealand First Government would nationalise the privatised power companies at below market prices.
Winston Peters had to slap down Prosser in a statement later in the day clarifying that any buy-back of power company shares would only be "at an appropriate time in the future."
"We would only be buying back shares when they became available," Peters said, describing Prosser's comment as a "throwaway" line.
Peters later told the conference New Zealand First would cut the company tax rate to 25 percent over three years from 2019.
David Seymour described Prosser's comments as those of a "f***ing idiot."
Labour's former leader Andrew Little was also in a combative mood, telling business leaders to "get with the programme" on higher wages and changes to the 90 day trial period.
Business leaders would certainly face a change of environment if there was a change of Government. Yesterday's conference carried echoes of the 'winter of discontent' that immediately followed the election of the Labour Government in 1999, which eventually led to a kind of rapprochement by the mid-2000s.
See Shane's full report from the conference on Newsroom Pro, where it was first published yesterday.
3. Inside Labour's election campaign
Newsroom's Sam Sachdeva spent some time this week inside Labour's campaign offices to find out what's going on behind the scenes.
He found an enthused campaign group using a combination of data mapping and face-to-face visits to get Labour's vote out.
Sam talked to the campaign's staffers to find out about Labour's 'Connect' data tool and how it's used to get out the vote and change votes.
See Sam's full story here on Newsroom Pro, where it was published first yesterday.
4. A roading vs rail clash
Newsroom's Parliamentary Press Gallery office has been hosting another Massey journalism student this week. We asked Meriana Johnsen to look at the growing debate about road vs rail, particularly in the wake of National's announcement of 10 new Roads of National Significance.
Meriana went to the Road Transport Forum's election conference in Wellington on Tuesday to find out what the industry thought, and how the political debate is shaping up.
She found a debate is brewing between National and the Opposition parties that cuts to the heart of their different approaches to Government’s role in building infrastructure – and who their supporters are.
National wants to spend big on roads in the regions. Labour, Green and New Zealand First want to spend big on rail and buses in both Auckland and the regions.
It is shaping up as a battle between car owners and truck drivers in the regions and younger bus and train passengers in Auckland. It pits young and urban against old and provincial; green versus grey.
It is also a battle between those prioritising climate change policies over regional economic growth, and between those who want to super-charge Auckland’s growth and those who see provincial areas as being neglected.
A key battleground is over whether fast-growing Land Transport Fund should be opened up for the rail industry to use.
See Meriana's full story here on Newsroom Pro, where it was published first yesterday.
5. Another Ohariu shock
Last night the Greens appeared to throw the remaining shreds of their cooperative agreement with Labour into the bin by re-nominating a candidate in the Ohariu electorate at the last minute.
The Greens put Tane Woodley up as a candidate in Ohariu, making it more difficult for Labour's Greg O'Connor to beat National's Brett Hudson.
Woodley has pledged only to campaign for the party vote, but the Green candidate received 2,764 votes at the 2014, which was significantly more than Peter Dunne's margin of victory.
6. While you were sleeping
Donald Trump threatened overnight in an angry and bitter speech at a rally in Arizona to shut down the US Government if Congress did not fund his wall with Mexico. The US Treasury has estimated the US Government will reach its debt ceiling in October and funding for the wall is now entangled in the legislative debate about increasing the debt ceiling.
Reuters reported Congress will have 12 working days from September 5 to approve spending measures to keep the government from shutting down. The prospect of a shutdown unnerved global markets.
There are other potential triggers for financial turmoil in September and October. A once-in-a-decade reshuffling of China's leadership at its Congress is also being closely watched for signs of a change in China's debt-driven growth model.
7. Coming up...
Jacinda Ardern is campaigning in Auckland today with a visit to a charity that makes school lunches for low decile schools.
Bill English is campaigning in Christchurch today and is expected to announce a Government contribution to a new stadium.
8. One fun thing
This cartoon via Seth Abramson on Donald Trump's anti-media rant overnight is worth a click.