The article is behind a paywall so copied here.

-----
Why NZ is doomed to a downhill spiral from 2030 unless we get on top
of debt - Matthew Hooton.
OPINION

Labour is chipper about re-election in 2026, entirely without
justification.

Strategists celebrated the first post-election Ipsos survey suggesting
voters rate the new Government’s performance no better than the last.

Roy Morgan likewise reports confidence plunging in the new Government
through March.

National’s pollsters, Curia, report Christopher Luxon’s net
favourability back below zero, at -5 per cent.

Business and consumer confidence are both sharply down.

Nevertheless, Luxon would easily be re-elected were an election held
today.

National is rated more competent than Labour on all top five issues
worrying voters. It beats Labour even on health, education and
employment, where the red team is usually stronger.

Voters haven’t warmed to Luxon but most clearly blame Labour for the
unfolding fiscal catastrophe.

Ignoring that Sir John Key and Bill English ran eight consecutive cash
deficits, Luxon and Finance Minister Nicola Willis blame Labour’s six
years for the mess.

NZ First leader Winston Peters says it took just three. In fact, Grant
Robertson wrecked the Government’s books in just two years, in 2022
and 2023, after Covid was behind us.

No one can explain why Labour kept borrowing even after Covid,
spending over $30 billion more in 2023 than during the lockdowns.

Labour attacks Luxon for allegedly running the country like a company,
which he denies. National counters that Labour ran the country like a
students’ association. If that’s the choice, median voters prefer the
former.

Despite reconsidering wealth taxes, Chris Hipkins remains convinced
his best bet is sitting back and letting National fail.

Utterly trapped in its Wellington bubble, Labour ludicrously describes
making a few thousand policy analysts redundant “austerity”, claiming
it will cause economic contraction and undermine government services.

Yet it also says Luxon and Willis’ tax cuts will fuel inflation, keep
interest rates high, delay a return to growth and see unemployment
continuing to rise.

Labour can’t have it both ways. More reputable centre-right economists
warn the second scenario is more likely.

But if the recession lingers through 2024, voters will experience the
inevitable reversion to the mean in 2025 and 2026 more strongly.

Luxon and Willis won’t have done much to deserve credit for the
election-year boom, but that won’t stop them claiming it.

Lo and behold, that school smartphone ban has delivered an economic
miracle!

Meanwhile, median voters will have enjoyed their extra $20 a week tax
cut, the minimum pollsters suggest meets Willis’ new “meaningful” test
which has replaced National’s innumerate pre-election promises.

If this sounds bleak, that’s because it is.

Already, we have run 13 cash deficits over the last 15 years.

To hide it, successive governments have increasingly labelled new
spending capex rather than opex, gaming the fiscal-responsibility
rules to make the operating balance before gains and losses (OBEGAL)
look better.

Treasury pushes back against the practice, but usually in vain.

When Willis ever achieves surplus, now not expected until 2028/9, New
Zealand will have run a cash deficit for 18 of the previous 20 years.
Even under the OBEGAL measure, there will have been just five
surpluses in 20 years, two under Labour.

Luxon and Willis promised to address Robertson’s wreckage seriously.

Instead, despite some trimming in Wellington, Willis will most likely
spend more in 2024/25 than Robertson budgeted for 2023/24.

Forgetting that when English took office, debt and debt servicing
costs had reached zero, Willis promises to mimic English’s “slow and
steady” approach to addressing the unfolding catastrophe.

At best, she seems set to repeat his record of a surplus or two before
voters give Labour another crack.

By then, annual debt servicing costs will have passed $15 billion.
Worse, Labour would take office just as the permanent fiscal deficits
forecast by Treasury lock in from 2030, fuelled by the costs of an
ageing population and ever-improving health technology.

Without greater urgency, NZ is doomed to a downhill spiral from 2030,
similar to Argentina’s collapse from one of the richest countries in
the world to basket case in the 20th century.

As recently as the 1930s, the average Argentinian was better off than
most people in Europe, North America or Australasia. Sophisticated
Parisians aimed to be “aussi riche qu’un Argentin” – as rich as an
Argentinian.

Confident that once a rich country always a rich country, Argentina
failed in the following decades to respond to changing trading
conditions and improve productivity. After World War II, like NZ in
2008, Argentina had almost no debt, so began borrowing to hide its
declining competitiveness.

Initially modest, its debt tripled from 20 per cent of GDP to over 60
per cent from 1975 to 1985, prompting a major debt crisis after
lenders lost confidence.

Argentina never properly recovered, with governments from left and
right unwilling to accept that Argentina was no longer first world.

Argentina’s fiscal deficit nearly came under control in the 1990s and
there were some surpluses in the 2000s, but it never escaped the debt
it had built up.

With no room to respond to new shocks like Covid, it has already
defaulted on its debts three times this century.

With no way out, it has no choice to impose brutal austerity.
Inflation has soared with households’ purchasing power collapsing by
up to 14 per cent a month. Sufficient daily calories are out of the
reach of increasing numbers, with nearly half the population living in
poverty.

Most New Zealanders, like Argentinians in the 1960s, will reject the
risk of a similar fate in the 2030s as hyperbole.

But Key and English could be sanguine about borrowing through the
2010s off a zero base. Even Jacinda Ardern and Robertson had fiscal
space in 2020.

With annual debt servicing costs already three times the police budget
and soon to exceed that spent on the entire school and early childhood
systems, Luxon and Willis have no more room to be sanguine than their
Argentinian counterparts in the 1960s.

If they insist on following Key and English’s “slow and steady”
approach, their legacy will be an economic crisis in the 2030s similar
to Argentina’s in the 1980s, with no prospect of returning to
first-world living standards.

In the 1930s and 1980s, after centre-right parties wouldn’t deal with
changing circumstances, Labour stepped up to do what the times
demanded.

This time, though, if Luxon and Willis won’t step up, then Labour has
no Michael Joseph Savage or David Lange and certainly no Walter Nash
or Roger Douglas.

Luxon and Willis are our last chance. Hopefully, after the Budget on
May 30, I owe them an apology.

Disclosure: Matthew Hooton has over 30 years’ experience in political
and corporate communications and strategy for clients in Australasia,
Asia, Europe and North America, including the National and Act
parties, and the Mayor of Auckland.

-----

Hooten is critical of past Governments of both stripes but clearly
favours National over Labour and for good reason. I like this quote:
"Labour attacks Luxon for allegedly running the country like a
company, which he denies. National counters that Labour ran the
country like a students’ association. If that’s the choice, median
voters prefer the former."

This is the best justification I have seen for delaying income tax
bracket indexation (aka tax cuts) that I have seen for a while.

--
Crash McBash

On 2024-04-05, Crash <nogood@dontbother.invalid> wrote:
> The article is behind a paywall so copied here.
>
> -----
> Why NZ is doomed to a downhill spiral from 2030 unless we get on top
> of debt - Matthew Hooton.
> OPINION
>
> Labour is chipper about re-election in 2026, entirely without
> justification.
>
> Strategists celebrated the first post-election Ipsos survey suggesting
> voters rate the new Government’s performance no better than the last.
>
> Roy Morgan likewise reports confidence plunging in the new Government
> through March.
>
> National’s pollsters, Curia, report Christopher Luxon’s net
> favourability back below zero, at -5 per cent.
>
> Business and consumer confidence are both sharply down.
>
> Nevertheless, Luxon would easily be re-elected were an election held
> today.
>
> National is rated more competent than Labour on all top five issues
> worrying voters. It beats Labour even on health, education and
> employment, where the red team is usually stronger.
>
> Voters haven’t warmed to Luxon but most clearly blame Labour for the
> unfolding fiscal catastrophe.
>
> Ignoring that Sir John Key and Bill English ran eight consecutive cash
> deficits, Luxon and Finance Minister Nicola Willis blame Labour’s six
> years for the mess.
>
> NZ First leader Winston Peters says it took just three. In fact, Grant
> Robertson wrecked the Government’s books in just two years, in 2022
> and 2023, after Covid was behind us.
>
> No one can explain why Labour kept borrowing even after Covid,
> spending over $30 billion more in 2023 than during the lockdowns.
>
> Labour attacks Luxon for allegedly running the country like a company,
> which he denies. National counters that Labour ran the country like a
> students’ association. If that’s the choice, median voters prefer the
> former.
>
> Despite reconsidering wealth taxes, Chris Hipkins remains convinced
> his best bet is sitting back and letting National fail.
>
> Utterly trapped in its Wellington bubble, Labour ludicrously describes
> making a few thousand policy analysts redundant “austerity”, claiming
> it will cause economic contraction and undermine government services.
>
> Yet it also says Luxon and Willis’ tax cuts will fuel inflation, keep
> interest rates high, delay a return to growth and see unemployment
> continuing to rise.
>
> Labour can’t have it both ways. More reputable centre-right economists
> warn the second scenario is more likely.
>
> But if the recession lingers through 2024, voters will experience the
> inevitable reversion to the mean in 2025 and 2026 more strongly.
>
> Luxon and Willis won’t have done much to deserve credit for the
> election-year boom, but that won’t stop them claiming it.
>
> Lo and behold, that school smartphone ban has delivered an economic
> miracle!
>
> Meanwhile, median voters will have enjoyed their extra $20 a week tax
> cut, the minimum pollsters suggest meets Willis’ new “meaningful” test
> which has replaced National’s innumerate pre-election promises.
>
> If this sounds bleak, that’s because it is.
>
> Already, we have run 13 cash deficits over the last 15 years.
>
> To hide it, successive governments have increasingly labelled new
> spending capex rather than opex, gaming the fiscal-responsibility
> rules to make the operating balance before gains and losses (OBEGAL)
> look better.
>
> Treasury pushes back against the practice, but usually in vain.
>
> When Willis ever achieves surplus, now not expected until 2028/9, New
> Zealand will have run a cash deficit for 18 of the previous 20 years.
> Even under the OBEGAL measure, there will have been just five
> surpluses in 20 years, two under Labour.
>
> Luxon and Willis promised to address Robertson’s wreckage seriously.
>
> Instead, despite some trimming in Wellington, Willis will most likely
> spend more in 2024/25 than Robertson budgeted for 2023/24.
>
> Forgetting that when English took office, debt and debt servicing
> costs had reached zero, Willis promises to mimic English’s “slow and
> steady” approach to addressing the unfolding catastrophe.
>
> At best, she seems set to repeat his record of a surplus or two before
> voters give Labour another crack.
>
> By then, annual debt servicing costs will have passed $15 billion.
> Worse, Labour would take office just as the permanent fiscal deficits
> forecast by Treasury lock in from 2030, fuelled by the costs of an
> ageing population and ever-improving health technology.
>
> Without greater urgency, NZ is doomed to a downhill spiral from 2030,
> similar to Argentina’s collapse from one of the richest countries in
> the world to basket case in the 20th century.
>
> As recently as the 1930s, the average Argentinian was better off than
> most people in Europe, North America or Australasia. Sophisticated
> Parisians aimed to be “aussi riche qu’un Argentin” – as rich as an
> Argentinian.
>
> Confident that once a rich country always a rich country, Argentina
> failed in the following decades to respond to changing trading
> conditions and improve productivity. After World War II, like NZ in
> 2008, Argentina had almost no debt, so began borrowing to hide its
> declining competitiveness.
>
> Initially modest, its debt tripled from 20 per cent of GDP to over 60
> per cent from 1975 to 1985, prompting a major debt crisis after
> lenders lost confidence.
>
> Argentina never properly recovered, with governments from left and
> right unwilling to accept that Argentina was no longer first world.
>
> Argentina’s fiscal deficit nearly came under control in the 1990s and
> there were some surpluses in the 2000s, but it never escaped the debt
> it had built up.
>
> With no room to respond to new shocks like Covid, it has already
> defaulted on its debts three times this century.
>
> With no way out, it has no choice to impose brutal austerity.
> Inflation has soared with households’ purchasing power collapsing by
> up to 14 per cent a month. Sufficient daily calories are out of the
> reach of increasing numbers, with nearly half the population living in
> poverty.
>
> Most New Zealanders, like Argentinians in the 1960s, will reject the
> risk of a similar fate in the 2030s as hyperbole.
>
> But Key and English could be sanguine about borrowing through the
> 2010s off a zero base. Even Jacinda Ardern and Robertson had fiscal
> space in 2020.
>
> With annual debt servicing costs already three times the police budget
> and soon to exceed that spent on the entire school and early childhood
> systems, Luxon and Willis have no more room to be sanguine than their
> Argentinian counterparts in the 1960s.
>
> If they insist on following Key and English’s “slow and steady”
> approach, their legacy will be an economic crisis in the 2030s similar
> to Argentina’s in the 1980s, with no prospect of returning to
> first-world living standards.
>
> In the 1930s and 1980s, after centre-right parties wouldn’t deal with
> changing circumstances, Labour stepped up to do what the times
> demanded.
>
> This time, though, if Luxon and Willis won’t step up, then Labour has
> no Michael Joseph Savage or David Lange and certainly no Walter Nash
> or Roger Douglas.
>
> Luxon and Willis are our last chance. Hopefully, after the Budget on
> May 30, I owe them an apology.
>
> Disclosure: Matthew Hooton has over 30 years’ experience in political
> and corporate communications and strategy for clients in Australasia,
> Asia, Europe and North America, including the National and Act
> parties, and the Mayor of Auckland.
>
> -----
>
> Hooten is critical of past Governments of both stripes but clearly
> favours National over Labour and for good reason. I like this quote:
> "Labour attacks Luxon for allegedly running the country like a
> company, which he denies. National counters that Labour ran the
> country like a students’ association. If that’s the choice, median
> voters prefer the former."
>
> This is the best justification I have seen for delaying income tax
> bracket indexation (aka tax cuts) that I have seen for a while.
>
>
Indeed very interesting. It does explain the ongoing finanical "hole"
forecasts which seem to be larger and longer lived than is usually the case.