Grant Robertson has delivered his first major speech as Finance Minister, telling an audience of bankers and fund managers in Auckland that he would unveil the new Government's half yearly fiscal update and Budget policy statement on December 14.
He said it would show the Government meeting its Budget Responsibility rules of running a surplus over the cycle and reducing net core crown debt to 20 percent of GDP within five years of taking office, but he also said it would require discipline from his ministers.
Robertson also foreshadowed Treasury economic forecasts showing a softening of GDP growth through 2018, before it firmed again in 2019 and 2020.
"You will see when the Half Yearly Update is released that we are meeting our Budget Responsibility Rules, in particular the commitment to reduce net core crown debt as a percentage of GDP to 20 percent within five years of taking office," Robertson said at a breakfast event hosted by ANZ in Auckland.
"One of the core elements of the 100 Day Plan is the reversal of National’s tax cuts. This provides $8 billion of fiscal headroom over the forecast period. This will more than meet the costs of the 100 Day Plan and provide further resources to invest in Budget 2018 and beyond," he said.
"The Budget Policy Statement will outline our priorities for Budget 2018 and show the level of operating and capital allowances for the next four Budgets. These allowances provide the expenditure necessary to deliver our policy plans, including the coalition and confidence and supply agreements."
Robertson said the new Government would also include current estimates of the commitments made outside its 100 day plan.
New economic forecasts
While not detailing what Treasury's forecasts for economic growth were, Robertson said there had been a range of forecasts for economic growth since the new Government was formed.
"Some are more pessimistic than others, with both the Reserve Bank and the OECD Economic Outlook more optimistic than some of the bank economists," he said.
"In general these economists agree that over the next year there will be some softening of growth as the housing market remains flat and as net migration tapers off slightly. Then, there is a consensus of a stronger growth track through 2019 and 2020, which is expected to be supported by Government policies such as increasing R&D tax credits, increased wages and export growth," he said.
"In other words, we’ll be swapping out population growth and the buying and selling of houses to each other as our two main growth drivers for much more sustainable ones. That sounds like a good description of our plan. If that means slightly lower growth for a year while the transition to a productive economy occurs, then that will be a price worth paying.
"As one economist put it, we will be passing on the baton of growth."
Amending public finance act
Elsewhere, Robertson emphasised the Government's drive for better quality growth, including improving and measuring living standards and lifting productivity and wages.
He said Labour's supply and confidence agreement with the Green Party committed the Government to working on new sustainable development indicators.
"Alongside this work I have asked the Treasury to further develop and accelerate the world-leading work they have been doing on the Living Standards Framework. This focuses on measuring our success in developing four capitals – financial, physical, human and social. These give a rounded measure of success and of how Government policy is improving our well-being," he said.
"This is a far better framework for judging our success. It is easy to say a policy is successful if it grows GDP, but what if that is at the expense of the physical environment? How can we be successful if the skill level of our workforce is not improving at the same time? If we do not have strong communities, any individual success can easily be undermined.
"Success for us will mean more than just a strong balance sheet - as important as that is. It will be marked by how we improve the well-being of all our citizens.
"This framework is still being developed, but I see this approach of focusing on well-being and lifting living standards as a core element of how we will create our future Budgets and measure the success of our work."
Robertson said it was too late to make significant changes around the living standards measures in the 2018 Budget, but he would say more in next May's Budget about that new approach.
"We will, however, take the first steps in this direction as part of our 100 Day Plan. We will introduce legislation to set measures of child poverty and a requirement to set reduction targets against them. This will include amending the Public Finance Act to ensure this work is part of our Budget process," he said.