OnPoint by Keith Ng


Fiscal Responsibility is the New Black

This? This is just accounting burlesque - showing you half the picture, and strategically cover the other half.

It's all very legitimate - if you care about accounting. Some bits are capital and other bits are revenue. So some bits get counted in the "surplus" and other bits don't.

In saying that they would get back to surplus faster as fast as than National, Labour takes the money from asset sales off the debt books, but counting the revenue that we would get from those assets on the operating books; they count the revenue we would get on extra contribution to the Super Fund on the operating books, but put the cost of the contribution on the debt books.

(CORRECTION/CLARIFICATION: Labour only counted the extra *tax* revenue on the additional interest from the additional Super Fund contribution, not the additional interest itself.)

Here's the simple truth about asset sales and the Super Fund: In the short-term, it's just moving money around. It doesn't spend it, it doesn't earn it. It's effect on our net position in the short-term is bugger-all. Anyone who's telling you that it'll significantly change our position in the next few years is, at best, pulling some kind of accounting trick.

The real difference is in the long-term, and it depends entirely on interest rates, SOE performance, Super Fund management, etc. Labour's making a pretty modest argument for restarting contributions to the Super Fund, saying that it'll earn 0.5% above the cost of capital. It's such a mundane claim, I don't see how it can be reasonably challenged. And on the SOE front, National's argument has always been about the wider economic impact - on the sharemarket, etc. - not that the government will see a fiscal gain.

Which is to say, Labour has a decent claim to doing better in the long-term.

But in the short-term, whether Labour will return to surplus faster than National - or not - is just spin scribbled on napkins. These are rough estimates, and "surplus" for a year is an entirely arbitrary point. So when will this made up line cross an arbitrary point? Whenever it's politically convenient.

The most important thing to come out of today's annoucement is a tally of costings for Labour's policies: Most of them are chump-change. The big ticket items are changes to KiwiSaver and "Policies yet to be announced". So it looks like the biggest spending programmes are yet to come.

There's also some strange spin going on. David Parker said that KiwiSaver changes is the biggest item of new "spending". Which is technically true, since tax cuts are cutting revenue, rather than increasing spending. But Labour's tax cuts (tax-free threshold, GST changes, R&D tax credits) are actually bigger than the KiwiSaver changes. In fact, it's bigger than all of Labour's new spending combined, including the ones which haven't been announced yet.

It's like they are petrified of talking about it because fiscally responsible is the new black. Unfortunately for them, it's also the biggest, most expensive goddamn thing in their policy.

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