WELLINGTON: New Zealand is in a “fragile” state and needs to put its public finances back in order as a pre-requisite to building a stronger economy, Prime Minister Christopher Luxon says in a major speech.
Government spending is up 84% since 2017 and debt has climbed from five billion New Zealand dollars (US$3bil) to a “staggering projection of well over 100 billion New Zealand dollars,” Luxon said in his first state of the nation address since taking office.
“I have to level with you New Zealand and say – the state of the nation is fragile.”
The prime minister highlighted the seven billion New Zealand dollars of savings delivered by Finance Minister Nicola Willis in a mini-budget in December, warning that “there will be more where that came from, I can tell you.”
Luxon’s government, a coalition of three centre-right parties, has promised to get on top of a cost-of-living crisis by stopping wasteful spending and refocusing the central bank solely on price stability.
It argues that a tight fiscal policy will help the reserve bank to return inflation to its target and allow it to begin to lower borrowing costs.
“Strong public finances aren’t enough of course to deliver a strong economy in their own right – but they are a critical pre-requisite,” Luxon said. “We can’t build infrastructure if we can’t be trusted to borrow money.”
He called for “a return to the orthodoxy of tight budgets” and a determined focus to keep or return the books to surplus. “Inflation has stayed high – the cost of living crisis isn’t over yet, with inflation here higher than Australia, the United States, Canada and Japan,” he said. — Bloomberg
