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Speaker 1: Right now, Nikola Willis is pushing out well, she's not

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Speaker 1: pushing out the surplace, but the surplace is being pushed

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Speaker 1: out from underneath her to twenty thirty from twenty twenty nine.

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Speaker 1: She's convinced she can still get there by twenty twenty nine,

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Speaker 1: but the books out today show well that ain't happening

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Speaker 1: at the moment. Net debt will peek at forty six

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Speaker 1: point nine percent of GDP in a couple of years.

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Speaker 1: Nikola Willis defending not cutting her budget allowances further because

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Speaker 1: that is.

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Speaker 2: What is required to ensure we can make the investments

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Speaker 2: needed to increase health service delivery, to ensure our schools

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Speaker 2: have the resources they need to pay their teachers and

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Speaker 2: deliver learning, that our police have the resources they need

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Speaker 2: on the front line, and to continue our build and

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Speaker 2: defense force capability.

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Speaker 1: Independent economists Cameron Bagriy is with me on the line now, Cameron,

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Speaker 1: good evening, good evena. What were your thoughts. I'm looking

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Speaker 1: at the hay for today.

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Speaker 3: Oh, not too many surprises. We're your economy. First half

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Speaker 3: of this year was obviously going to have the tax

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Speaker 3: forecast achieving a surplace has been pushed out a year again,

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Speaker 3: so if you look at the bigger picture, yeah, we're

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Speaker 3: going to have a decade of deficits. And if you

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Speaker 3: look at the last two years, rong, the situation's actually

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Speaker 3: been worse than it actually hasn't been getting better. So

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Speaker 3: what's called the structural or the underlying deficit, there's been

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Speaker 3: getting worse than what we call a fair but of

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Speaker 3: what is called promise me nomics as and I promise

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Speaker 3: I'll get the books in order. But it's all backloaded

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Speaker 3: towards the last three years of the forecast, which is

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Speaker 3: tomorrow store. You're right here, and now we know that

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Speaker 3: the numbers have been deteriorating for the past two years.

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Speaker 1: Is she right when she says, well, I could fix that.

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Speaker 1: I could cut and I could hack like the you

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Speaker 1: know Ruth Richardson wants me to do, But that would

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Speaker 1: undermine the very growth story I'm trying to tell.

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Speaker 3: Well, she is going to be hacking because if you

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Speaker 3: look at what's called the structural deficit is going to

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Speaker 3: deteriorate for another twelve months. The structural deficit has been

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Speaker 3: deteriorating for the past couple of years, it's going to

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Speaker 3: continue to tiate for another twelve months. From twenty twenty

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Speaker 3: seven to toy and thirty to get the books back

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Speaker 3: in the red. That's when the government is going to

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Speaker 3: be crunching government expenditure to the tune they're going to

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Speaker 3: shrink it by two point three percentage points of GDP.

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Speaker 3: So there's a fair bit of hacking that's going to

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Speaker 3: be going on, but it's in the back end of

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Speaker 3: the forecast. What's been going on now and in the

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Speaker 3: next sort of twelve months. We're seeing a bit of

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Speaker 3: spending restraint, but we haven't seen extual fiscal restraint. We're

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Speaker 3: seeing an awful lot of initiatives on the revenue side

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Speaker 3: of the equation, and of course when you know that's

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Speaker 3: led to a deterioration in the structural deificit. So the

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Speaker 3: hard yards haven't really started yet, right, and the hard

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Speaker 3: yards really start in twenty twenty seven, and so we.

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Speaker 1: And basically we're on a hope and a prayer that

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Speaker 1: that will actually happen too, aren't we.

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Speaker 2: There.

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Speaker 3: Well, I guess you look at your zeal superannuation and

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Speaker 3: look at health needs, infrastructure. You know, with any finance minister,

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Speaker 3: doesn't matter whether it's Nikola Willis or whether it's opposition

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Speaker 3: political parties. They're all stuck in what's called the impossible trinity.

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Speaker 3: Now you've got three corners to a triangle. On one corner,

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Speaker 3: you've got this thing called fiscal credibility. You want to

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Speaker 3: show responsible fiscal management. You want to go from depths

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Speaker 3: at a surplus. You want to pay down a little

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Speaker 3: bit of debt just in case we have some sort

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Speaker 3: of economic shock, to make sure you've got a little

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Speaker 3: bit of money to read employe. You've got rating agencies

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Speaker 3: that are looking at you. The second part of the

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Speaker 3: triangle is infrastructure investment, and those infrastructure investment needs are

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Speaker 3: immense and you're going to have to borrow for that.

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Speaker 3: And the third part of the triangle is called social services.

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Speaker 3: You can be on two sides, or you can hit

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Speaker 3: two sides of the triangle. You can't hit three. And

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Speaker 3: if a look at the forecast what we're presented today,

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Speaker 3: it's pretty obvious that social services, your real spending per capita,

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Speaker 3: is going to shrink, and that will be a point

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Speaker 3: of vulnerability, not just for the current government, but any

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Speaker 3: government going forward. Because you can get two out of three,

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Speaker 3: you can't get three out of three.

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Speaker 1: So what's the rabbit that's going to be pulled out

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Speaker 1: of the hat. They did it with pay equity last budget.

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Speaker 1: What's next years? Do you reckon there's something to do

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Speaker 1: with ACC?

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Speaker 3: I suspect so and that that's that's an economic comparative anyway,

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Speaker 3: a lot of those Crown entities. It doesn't matter if

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Speaker 3: you look at Health New zeal And, you look at

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Speaker 3: King Aura, or you look at your ACC. They're bleeding cash.

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Speaker 3: They're adding to the deficit. They've got to turn those

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Speaker 3: ships around. How do you turn his ACC around? Well,

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Speaker 3: ultimately someone pays and guess who pays ACC.

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Speaker 1: Levies US Treasury reckons the ocr is going to stay

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Speaker 1: low for the next three years or so. But markets

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Speaker 1: have been behaving well quite differently. Who who do we

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Speaker 1: believe on that?

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Speaker 3: I believe markets at the moment, Yeah, I think we're

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Speaker 3: more like that. You get a twenty twenty six high

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Speaker 3: as a post lock. Treasury's got to set a forecast

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Speaker 3: that's say potential growth, your productivity growth is going to

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Speaker 3: pack up. That packs up. You can absorb something to

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Speaker 3: pick up demand without creating inflation. Inflation is going to

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Speaker 3: magically stay around two percent. Inflation stays aroun two percent,

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Speaker 3: the official cash strakes to stay low right out to

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Speaker 3: about twenty twenty eight. Do I believe in that sort

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Speaker 3: of magical theory sort of story. The answer is no.

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Speaker 3: You know, I think the economy is picking up. I

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Speaker 3: think productivity growth is still going to be reaching me anemic.

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Speaker 3: What does extualgiested to me inflash is not going to

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Speaker 3: go back down to two percent, So the reserve being's

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Speaker 3: going to be back and play sometime in twenty twenty six.

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Speaker 1: Good to know, Cameron. Thank you, Cameron Baggriy Independent Economists.

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