Finance Minister Grant Robertson has been warned to be less liberal in his economic policy, to avoid potentially counteracting the Reserve Bank’s attempt at manufacturing a recession.
Treasury has forecast a recession to hit next year. According to ANZ, business confidence – which government policy has an impact on – is the lowest it has been since the 1980s – even lower than during the 2008 global financial crisis.
Robertson says no one wants a recession, and that he and his team are pivoting the focus of spending policy away from the COVID response and shifting it to the financial crisis, putting more attention into the cost of living. He says it’s time for government finances to be ‘more prudent’, and ‘We need to be flexible, careful, and balanced.’ Robertson used the word ‘balance’ over 30 times during the latest budget policy announcement.
Some say Labour is attempting to appeal to centrist voters, but for a government spending at unprecedented rates, to suddenly change its spots needs to be seen to be believed.
A rock and a hard place
Robertson stated ‘It is time for fiscal policy to aid the Reserve Bank’s monetary policy’.
The actions of the Labour Government however, still seem very much at odds with the goals of the RBNZ. The Finance Minister said the Government’s focus will be keeping as many Kiwis in work as possible. Yet the RBNZ says it wants to lower employment, in an attempt to bring down inflation. The Government is also saying it will support Kiwis in tough times, that is, when they can’t support themselves. But wouldn’t that government support just result in increasing spending that the Reserve Bank wants to see reduced?