Hi Friend,

Before every election, Treasury opens the books. It's the last chance before New Zealand goes to the polls to pull apart Government finances and see where the bodies are buried. Ray, Matt, and I were in the media lock-up today, and here's a rare surprise...

There is some genuine good news, and the Government does look to have finally turned a corner.

In the year just ended, tax revenue came in $1.1 billion ahead of expectations, and core Crown spending $1 billion below.

For the first time since 2018, Treasury is now forecasting a genuine cash surplus. Without one, debt can't start being paid back. Admittedly not til 2031, which means there won't be a single cash surplus in the 2020s.

But here's the kicker: debt is still going up by $56 million a day. The books being better than expected does not mean that they're good. We’re seeing some positive first steps to recovery here, but it's fragile.

The debt bill keeps growing 📈

Total Crown borrowings are forecast to reach $363.8 billion by 2031.

That is $160,663 for every household in New Zealand, up $17,757 per household on the year just ended.

And there is not a single year in Treasury's forecasts where total borrowings fall.

This year alone, the Government will add another $20.4 billion of borrowing, or $9,743 per household.

By 2031, interest costs will reach $16.5 billion a year, or $7,288 for every household. That is more than spending on police, corrections and schools combined.

It buys no nurses, no surgeries and no roads. It is simply the cost of running the country on the credit card.

Treasury have shown that New Zealand will run a paper surplus in 2029, one year earlier than predicted in May.

But once capital spending is counted, the Government is still $7.3 billion in the red that year, more than $3,343 per household.

A paper surplus doesn't pay back the debt. The first cash surplus doesn't arrive until 2031, and even then total borrowings are still rising at the end of Treasury's forecasts.

And now comes the election bidding war 💸

Today's PREFU laid bare just how precarious our recovery really is, with a $1,457-per-household cash surplus finally expected early next decade. But every political party so far is promising even more new spending, and most are already planning to blow that recovery (and then some!).

Our Bribe-O-Meter currently has Labour adding $24,358 per household, Opportunity at $105,406, and the Greens at $114,239 - all of which would dwarf any surplus.

And Labour's capital gains tax won't come close to filling the hole. With Treasury now saying house price growth will be lower than expected, the gap keeps getting wider.

This has to be the debt election 🗳️

The recovery is fragile. The big pressures in health, welfare and super have not gone away.

Today, Treasury showed us the reality parties have to work with: debt is still growing, spending is still climbing, and billions of dollars are being swallowed by interest every year.

Whoever forms the next Government needs a plan to start paying debt down, not simply a plan to borrow a little more slowly.

There are just over five weeks until election day. This has to be the debt election.

Thank you for your support,

James Ross Head of Policy & Legislative Affairs New Zealand Taxpayers’ Union