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| Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz | ||||||||||||
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That said, what they have presented is more than just a Budget. It is their utopian vision for a different country. Unfortunately, it is also based on ludicrous assumptions and bad economics. The cornerstone of the Green revenue plan is a wealth tax raising $72.5 billion over four years. That is, well, optimistic. Just ask Germany, France and Sweden why they abandoned similar taxes. The reasons were capital flight, tax avoidance and administrative nightmares. Treasury has warned against rapidly implementing a wealth tax alone due to “high risk of unforeseen issues and unintended consequences.” Yet the Greens propose multiple complex reforms without addressing the public service’s capacity to design them. Good luck with that. Then, there is the private jet tax at $5,000 per passenger. Would wealthy travellers pay this? No. They would simply switch to first-class commercial flights. Or they would not come here at all. Their plans for universal dental care reveal startling ignorance. With just over 2,100 dentists nationwide, and a mere 3.7% of them in public service, who exactly will provide these services? Current public dental waiting lists already exceed 12 months. Adding millions more patients without dentists is magical thinking, not policy. Their public housing plans also defy practical reality. The Green Budget promises to build 35,000 public homes over five years – that is 7,000 per year. Yet Kāinga Ora is currently struggling to deliver 1,500 homes annually. Remember KiwiBuild’s promise of 100,000 homes? The Greens apparently do not. They offer no realistic plan for quadrupling construction capacity in a sector already facing severe workforce shortages and supply chain constraints. Their $395 weekly Income Guarantee ignores inevitable market responses. When everyone suddenly has more money but no increase in housing or goods supply occurs, prices adjust upward. Housing markets would tighten as more people compete for the same limited housing stock, driving rents higher. Retail prices would similarly rise with increased consumer spending power. Thus, we would quickly return to similar inequality but with vastly higher government spending. The Greens have presented us with a textbook case of utopian thinking. And not coincidentally, “utopia” literally means “a place that does not exist.” Good policy requires a realistic assessment of implementation challenges, behavioural responses and economic constraints. All are notably absent from the Green Budget. What we have instead is an ideological statement masquerading as fiscal planning. It may sound appealing to the Greens’ supporters. But it cannot exist in reality. |
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| Roger Partridge | Chair and Senior Fellow | roger.partridge@nzinitiative.org.nz | ||||||||||||
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Treasury’s long-term models are flashing red. The International Monetary Fund ranks New Zealand among the worst in the developed world for structural fiscal deficits (the gap between government revenue and spending even when the economy is not in recession). Core Crown spending continues to rise, and debt is on track to spiral without reform. Some of the pressure comes from the rapid increase in the bureaucracy. The core public service grew from around 47,000 in 2017 to more than 63,000 full-time equivalents just before the 2023 election. Remarkably, it jumped again post-election to over 65,000. Cynics might conclude departments rushed to fill desks ahead of a change in government so that, after a bit of trimming, nothing would really change. So far, they have been proved right. Core public service numbers remain close to the pre-election figure. You can almost see Sir Humphrey Appleby smiling. The cuts from the peak may have been modest. But the fiscal cost is not. Core Crown personnel expenses are now north of $10 billion annually – up more than 45% since 2017. This growth has not focused on the frontline. Between 2017 and 2022, the number of public service managers increased by 51%. Policy analyst numbers rose by 50%. Information professionals surged by 73%. The Ministry of Education illustrates the pattern. In 2000, it employed just 599 people. By 2017, it had grown to the mid-2000s. By 2023, it had ballooned to over 4,300. Student achievement, meanwhile, has declined. To her credit, Willis initiated a savings programme on taking office. Agencies that had grown by more than 50% since 2017 were asked to cut 7.5% from their budgets. About 2,250 roles have been removed. But this is far from restoring balance. Returning the public service to 2017 levels would save up to $1.5 billion annually. It would also send a clear message: performance, not payroll, is what matters. No one knows the optimal number of public servants. But in 2017, few thought the system was understaffed. A leaner, more effective public service is not an ideological ambition but a fiscal necessity. The bureaucracy cannot remain a protected species while debt climbs and outcomes stagnate. This is not just about numbers. It is about whether the Government is willing to lead by example. |
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| Dr Benno Blaschke | Research Fellow | benno.blaschke@nzinitiative.org.nz | ||||||||||||
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MBIE, for those who have been blissfully unaware, is the government's sprawling super-ministry that oversees everything from immigration to science policy. One of its tasks is to lead the reform of New Zealand’s science, innovation and technology system — the system we’re meant to rely on for our future industries, exports, and economic growth. When the government set out to reform this system, the bold idea was to unlock economic potential, support start-ups, and maybe even invent something the world wants to buy. Instead, we got a colour-coded org chart and some Crown Research Institutes (CRIs) playing musical chairs. But let’s be fair: MBIE is trying. It’s just that trying to steward a whole system while also worrying about who left the lights on at the research institutes is a bit much. Naturally, the reform gravitated toward what MBIE knows best: monitoring, rearranging, and rebranding. Meanwhile, our one dedicated innovation agency, Callaghan Innovation — created to connect research with business — is being quietly wheeled out the back. Failed? Certainly. Fixable? Probably not. But the solution? Fold critical innovation functions into MBIE — an organisation about as well suited to supporting entrepreneurs as a filing cabinet is to launching tech start-ups. Thankfully, Sir Peter Gluckman, former Chief Science Advisor to the Prime Minister, has wandered back into the picture. Gluckman chairs the new Science System Advisory Group. He might not have all the answers, but his presence has introduced something radical: competitive advice. Suddenly, MBIE has had to explain why doing the same thing again would be different this time. And it can’t. So now, on Gluckman’s advice, we have the PM’s new advisory council and whispers of an Advanced Technology Research Organisation (or as insiders call it, “the policy placeholder with potential”). Better still, Gluckman’s second round of advice is headed straight for the startup and commercialisation ecosystem — the bit everyone agrees matters, but no one got around to properly set up and resource. Whether or not he gets it right, someone is finally looking in the right direction. If MBIE’s reform journey has taught us anything, it’s that when the house is sinking, rearranging the furniture won’t help — even if you file the change request in triplicate. |
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