National Party leader Christopher Luxon says the Government is ‘addicted to spending’. Video / NZ Herald
The Government is accused of exacerbating soaring inflation with “wasteful” spending, as Finance Minister Grant Robertson blames global pressures – and stresses his administration doesn’t control the cost of food and fuel.
Opposition parties are ramping up efforts to pin rising inflation on Government spending as much as global factors after record annual inflation of almost 7 per cent was revealed today.
Robertson and National leader Christopher Luxon have responded to the latest statistics, showing a 6.9 per cent increase in the consumer price index for the March quarter – the highest annual increase in 30 years.
Luxon told reporters in Auckland that Kiwis were facing a cost of living crisis and the reality was that people were worse off now than they were 12 months ago.
The Government was spending too much money on “wasteful” projects and this had contributed to inflation.
New Zealand had higher inflation than Australia, Singapore and Japan and those countries were also affected by the global pressures such as the Ukraine war.
Luxon accused Labor of being “addicted to spending”.
“The Government must take responsibility for its spending, which is driving domestic inflation.”
That meant showing more financial discipline and getting the Government’s books in order.
“We’re about to spend $ 29 billion on light rail – that doesn’t feel like a good return on an investment. We have to reprioritise spending”, Luxon said.
“We’re not talking about cutting services, but we’re saying have more austerity around that.”
Not all spending was bad and Luxon said he understood some money had to be spent during the pandemic – but not all of it was needed.
‘Govt can’t control the price of food, fuel’
Robertson has pointed to global issues, such as the war in Ukraine and disrupted shipping and supply lines because of Covid-19 as the main factors in rising inflation.
There were things the Government could do to relieve the strain on households, Robertson told reporters, while taking a swipe at National, saying “untargeted tax cuts are not one of them”.
“What I take responsibility for is making sure we manage our resources well enough.”
If people were criticizing Government spending, they needed to say what they thought money should not have been spent on.
“There is no free lunch here, so if National is saying that, what are they going to cut?”
Robertson said much of next month’s Budget’s funding increases were earmarked for health.
Asked if he would consider trimming the $ 6 billion allocation for new spending, he said most commentators were forecasting inflation to ease by the time that spending started to take effect in July.
“But we are always careful about the way we put Budgets out.”
Robertson had not had any advice on what inflation was running at for the current quarter.
The Reserve Bank was using the tools it had to peg back inflation and the Government’s role was to make sure its money was well spent, and looked after New Zealanders.
Asked if he thought building materials were too expensive in New Zealand, he said: “Yes, yes I do.”
“This is an area where a more competitive market would serve New Zealanders better.”
The Government would respond to a Commerce Commission study of the building industry soon.
“These are challenging times for the global economy with significant increases in food and fuel prices hitting all nations,” the Finance Minister said.
He noted inflation was at a 40-year-high of 8.5 per cent in the United States and a 30-year high of 7 per cent in Britain.
“Chinese ports have been shut for long periods, adding to supply chain disruptions. New Zealand cannot be immune to these challenges and the Government can’t control the price of food or petrol,” Robertson said.
There were no “silver bullets” for dealing with the current inflation situation, he said, noting that the Reserve Bank was tasked with restricting inflation to 1- 3 per cent.
“But the reality is that for many families the pressure from these high prices are real. We are well positioned to respond to this challenge.”
Robertson said unemployment was at a record low, exports were up and the economy was growing.
However National’s Luxon said Robertson had to do what he could to address the domestic pressures on inflation.
“He must take responsibility for presenting a sensible plan to help combat inflation pressures – reducing costs, removing bottlenecks and ensuring value for taxpayers’ money.
“Instead, at a time when we need careful economic management and spending discipline, he seems intent on pushing ahead with a record $ 6 billion increase in annual spending in next month’s Budget.”
Luxon said government spending was clearly a factor, pointing to Reserve Bank Adrian Orr recent comments on the general impact of Government spending on efforts to control inflation.
Act Party leader David Seymour said the increase showed 2022 was the “year of the hangover” after Covid-19.
He also pointed to the increase in government spending and the $ 6b allocated for new spending in the upcoming Budget.
“Today’s inflation figures are the direct result of Labor’s addiction to borrowing and spending and Kiwi families are paying an almighty price,” Seymour said.
“The Government’s refusal to take responsibility is the equivalent of it giving the middle finger to middle New Zealand.”
However, the Green Party’s finance spokeswoman Julie Ann Genter urged the Government not to buckle to the calls of National and Act to cut taxes or cut government spending, and instead give more support to those on low incomes.
“High inflation is not experienced equally, and for people on the lowest incomes this means struggling to pay the rent and put food on the table,” Genter said.
Seymour said help could be given to New Zealanders by tax cuts and pruning Government spending.
He released new policy to shrink the public service back to 2017 levels after a ballooning during Covid-19. That would include a stocktake of which Government departments were still necessary.
“If businesses don’t deliver, they go. Why should a government department be any different?
“How many zombie departments and bureaucrats does this country have? People who just carry on collecting a pay check. Why do we put up with the idea that government can get bigger, but it can never get smaller?
He said Labor had added 13,845 full-time equivalent workers at an average salary of $ 87,600 since 2017: “That’s an extra $ 1.21 billion in wages alone.”
The Greens proposed lifting benefits and Working for Families, as well as rent controls, free public transport and more action on supermarket prices.
The Government has made some moves on inflation – including cutting petrol taxes and road user charges for three months – but has pointed to its increase in entitlements and benefits in its April 1 families package changes as its key move.