\u201cSmaller developed nations like Finland and Ireland seem more comparable but are in the Eurozone so have the support of their neighbours. Many of the countries to which we often compare ourselves have some form of monetary, fiscal or trade support so are not like us at all,\u201d he said. <\/p>\n
In what could be read as a stark message not to all political parties, Little said governments will need to think not just about getting spending under control, but raising more revenue through taxes and selling some assets in order to sustain the public finances.<\/p>\n
Spending cuts, tax rises and asset sales are among the most politically challenging policy decisions for any government.<\/p>\n
Little addressed these challenges in a speech to the ANZ-Kanga News Debt Capital Markets Summit today, which focused on debt.<\/p>\n
\u201cFixing these intertwined fiscal and economic challenges will require successive governments using the levers available to them,\u201d Little said.<\/p>\n
A graph of New Zealand’s debt. Graph \/ Treasury<\/p>\n
\u201cControlling expenditure will remain critical. But revenue options need to be considered too,\u201d he said.<\/p>\n
While New Zealand\u2019s current tax system – which had a \u201cbroad base\u201d but a \u201clow-rate\u201d – was \u201cworld-class in many ways\u201d, Little said \u201cour fiscal and economic challenges mean we cannot afford not to look at tax as part of the long-term solution\u201c.<\/p>\n
\u201cJust because there are no easy short-term options is not a reason not to consider tax reform, particularly in how savings and investment are taxed. <\/p>\n
\u201cThe current system creates economic costs and limits options to raise revenue efficiently,\u201d he said.<\/p>\n
Little also said the Government needs to \u201cachieve better management of the Crown\u2019s balance sheet with improved performances of both assets and liabilities\u201d.<\/p>\n
He said he used the word \u201casset\u201d with \u201ctrepidation\u201d because \u201cthere\u2019s a tendency for debate to quickly narrow to asset sales\u201d.<\/p>\n
\u201cBut small gains achieved by better managing the Crown\u2019s $598 billion of assets, or its $409 billion of liabilities offer huge potential fiscal benefits,\u201d he said.<\/p>\n
Structural balance. Graph \/ Treasury<\/p>\n