In August of 2023<\/a>, things got bad enough that Finance Minister Grant Robertson announced across the board spending cuts, shaving off 2% of public service baselines, booking $2 billion in savings over four years.<\/p>\nBut still things deteriorated. The post-election Half-Year Update (Hyefu), showed a further major downwards revision. Willis can confidently claim that one\u2019s nothing to do with her either, as those forecasts were signed off when Labour was still in Government.<\/p>\n
These attacks on Treasury\u2019s forecast began last December.<\/p>\n
In an appendix to the Budget Policy Statement, a political document from the Finance Minister\u2019s office, usually published alongside Treasury\u2019s half-year forecasts, Wills included a rather unflattering graph, showing the Prefu\u2019s comparatively vertiginous economic growth forecasts alongside the rather more earthbound recent revisions.<\/p>\n
The commentary laid out her defence, giving two succinct reasons for the multiple backslides.<\/p>\n
The first, was Treasury now has a better understanding of the downturn, \u201cwhich started earlier, was deeper and has persisted for longer, than was previously understood or expected\u201d.<\/p>\n
The other is the Treasury\u2019s evolving assessment of productivity trends. With the benefit of hindsight, earlier economic forecasts attributed too much weight to an apparent pick-up in productivity during the Covid-19 pandemic that did not persist. <\/p>\n
Put even more succinctly, Treasury, in 2023, was wrong.<\/p>\n
Edmonds was keen not to let Willis off the hook.<\/p>\n
When Willis came to Edmonds\u2019 committee on Wednesday to defend the Budget Policy Statement, Edmonds\u2019 first question was on the comparisons with the Prefu, and how much of the economy\u2019s subsequent decline was due to forecasters being wrong, and how much was the fault of the Government?<\/p>\n
\u201cI have not been advised that the Government through any of its specific policy choices has contributed to that decline, in fact the Treasury\u2019s advice is that a number of actions we have taken have supported GDP to be stronger than it would otherwise be,\u201d was Willis\u2019 response.<\/p>\n
\u201cThere was a presumption that the bounce-back from the Covid period would be stronger than it was,\u201d she said, adding the latter for emphasis, \u201cit wouldn\u2019t matter if it was me sitting at the desk, Grant Robertson sitting at the desk, or Chl\u00f6e Swarbrick sitting at the desk, those forecasts would have occurred on anyone\u2019s watch\u201d.<\/p>\n
![\"Finance]()
Finance Minister Nicola Willis defends the forthcoming Budget at the Finance and Expenditure Committee. Photo \/ Mark Mitchell<\/p>\n
Edmonds asked Willis whether the committee could have a squiz at the advice she had received from Treasury on why the forecasts were wrong and needed to be revised.<\/p>\n
Willis was \u201cvery happy\u201d to oblige, answering with an enthusiasm that left you wondering whether, when Willis dialled up the advice, she did so with herself or a curious electorate in mind as the primary audience.<\/p>\n
Willis said she had \u201cextensive\u201d advice on why Treasury \u201crevised their forecast assumptions and what they think they got wrong prior to the election\u201d.<\/p>\n
\u201cYou can imagine coming in as a minister, having been presented a set of forecasts prior to the election with a fair expectation that that is what would happen, to immediately have significant downward revisions, is something I have interrogated quite closely,\u201d Willis grinned.<\/p>\n
The coalition finds itself at the whim of a history not written by the victors. This is unusual. The last two Governments had far greater success in tarring their predecessors with the slur of \u201cnine years of neglect\u201d or a \u201cdecade of deficits\u201d.<\/p>\n
This Government, by contrast, hasn\u2019t quite managed to get the public to see things its way. It\u2019s belatedly accepted that the mood around the economy is dreadful, but it\u2019s waited too long to make a sophisticated case for why things aren\u2019t totally its fault.<\/p>\n
That\u2019s a challenge because it can\u2019t completely exonerate itself from the state of the economy either. Public spending retrenchment and pausing construction products would tend to have a negative impact on the economy.<\/p>\n
The obvious riposte to Labour, however, is that continuing to deficit-spend would, all things being equal, lead to higher more unsustainable debt, and higher interest rates, which, on balance, would be negative for the economy.<\/p>\n
Labour\u2019s been clear it wouldn\u2019t have cut taxes in 2024, but Willis\u2019 spending cuts have gone beyond what was needed to fund the tax cuts \u2013 Labour\u2019s got a question to answer here about whether, had it won the election, it too would have tightened its belt a bit.<\/p>\n
It\u2019s a messy waterbed of an argument: you jump down on one issue, only to see an equal and opposite question pop up somewhere else \u2013 and one which is so kaleidoscopic in its dizzying, ever-shifting complexity that only the most skilled politician can wade in.<\/p>\n
Yet wade in Willis must.<\/p>\n
The coalition MPs discovered this week that if it doesn\u2019t write its own history, Labour will be quite happy to write it for them.<\/p>\n","protected":false},"excerpt":{"rendered":"The annual debate on the Prime Minister\u2019s statement is one of the few parliamentary fixtures that live up…\n","protected":false},"author":2,"featured_media":440943,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[414,206070,28,10085,207821,101,33607,2314,207822,207823,4201,1596,25563,826,1139,11985,154423],"class_list":["post-440942","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-and","tag-broke","tag-business","tag-chris","tag-coughlan","tag-economy","tag-facts","tag-go","tag-hipkins","tag-nicola","tag-over","tag-the","tag-thomas","tag-to","tag-war","tag-who","tag-willis"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/440942","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=440942"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/440942\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/440943"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=440942"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=440942"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=440942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}