The new Government’s Budget Policy Statement, released yesterday, reflects the daunting fiscal challenges inherited from the previous Labour-led Government’s tax-deficit-and-spend policies. We empathise with the current Government’s predicament, having to navigate the consequences of excessive spending, high inflation, and a recession.

It is crucial to acknowledge that the Reserve Bank of New Zealand’s decision to flood the country with new money has been a significant contributor to the inflation we have experienced over the past couple of years. This, coupled with the previous Government’s fiscal policies, has created a complex and challenging environment for the new Government to operate within.

Despite these difficulties, we believe that a more vigorous and assertive approach is necessary to address the pressing issues facing our economy head-on. The long-term objectives outlined in the BPS, such as reducing core Crown Expenses and achieving an improving OBEGAL trajectory, are steps in the right direction but require more concrete plans and ambitious targets to inspire confidence.

We encourage the Government to draw inspiration from the fiscal management of the previous National-led Government under Minister of Finance and later Prime Minister Sir Bill English. By tightly managing core Crown spending, they achieved a commendable surplus of 1.9% of GDP in 2017. At the same time, core Crown debt was under 20 percent of GDP - and it is more than twice that today.

To truly motivate investment and growth, the new Government must articulate a principled framework for eliminating activities in which it has no comparative advantage. This will involve making tough decisions and prioritising spending programmes that yield the greatest benefits for our economy and society.

We also urge the Government to take a more proactive stance in addressing the Treasury’s warning of slowing productivity growth. By vigorously promoting policies aimed at reducing red tape and prioritising development, the Government can create an environment that fosters innovation and encourages investment.

While we acknowledge the delay in publishing the BPS and the lack of detailed fiscal forecasts, we remain hopeful that the May 2024 Budget will demonstrate a more ambitious approach to fiscal management.

The task ahead is undoubtedly challenging, but we believe that with greater positive energy, commitment, and vigour, the coalition Government can navigate these difficult times and lay the foundation for a more prosperous and resilient economy. New Zealanders are counting on their government to take decisive action and provide compelling reasons to invest in our nation’s future.