By RNZ

Finance Minister Nicola Willis has purloined one of Labour’s favourite phrases in a speech warning of worsening economic forecasts.

Speaking at the New Zealand Economic Forum at Waikato University this morning, Willis blamed the previous government for high inflation and rising unemployment.

“We have inherited an unhappy mix of high inflation, high interest rates, a contracting economy and rising unemployment. The Government books have deteriorated with deficits since the 2019-20 fiscal year and a return to a wafer-thin fiscal surplus is not forecast until 2026-27.

She warned the latest data had also thrown more doubt on New Zealand’s fiscal situation, which could lead to further declines in revenue and a weaker set of Government books.

“Our cautious view is that the emerging data suggests it is highly unlikely that the full set of forecasts in may will deliver any upside surprises when compared to the half-year update.”

She later said this included predictions for gross domestic product (GDP) and the consumer price index (CPI), and would mean “we’re not planning on the basis of more money in the kitty - we don’t see that we’re going to be flush with cash”.

She then ran through a laundry list of the Government’s actions and plans: The mini-Budget, stop-work notices, cuts and targets for the public sector, and a “health check” on Government infrastructure, borrowing a line from Labour leader Chris Hipkins’ campaign playbook.

“I view this programme of work I just described as the bread and butter of responsible government,” she said.

“It is no different to what any household or business does when its finances come under strain. It is necessary - in fact it should be routine - but in itself it will not deliver on our aspirations for the New Zealand economy.

“Our goal is to make this a much wealthier country where New Zealanders can earn more, live better and expect greater opportunities for our children and grandchildren.”

Finance Minister Nicola Willis gives a speech to the New Zealand Economic Forum at Waikato University. Photo / RNZ / Libby Kirkby-McLeod

With the new Government’s first Budget expected in May, Nicola Willis says a new approach is needed to boost New Zealand’s productivity and see it become the “make-it-happen capital of the Asia-Pacific [region]”.

She said New Zealand already had the “raw ingredients” to do so.

“Here we are, two major islands located in the fastest-growing region of the world, with a stable democracy and peaceful borders, blessed with extensive natural resources that give us the capacity for abundant renewable energy and sustainable food production, populated by people hard-wired for creativity and innovation, with extensive trade connections and potential for more, home to entrepreneurs and established firms leading the world in pursuits ranging from digital effects and online accounting to rocket-launching and infant formula production,” she said.

“We are a Government of action, and we will be bold. It is time to be bold, to remove barriers, and embrace ambition.”

She closed her speech with a focus on the social investment approach championed by her mentor Bill English, saying it was “about using data, evidence and modern analytics to invest in earlier and better intervention that can effectively break cycles of disadvantage, dependence and despair”.

This approach could help the people she said remained locked out of the opportunities that should be available to them in a modern economy, “Kiwis whose human potential is going unrealised, whose lives may have veered off track”.

“I’m thinking, for example, of the growing numbers of young people not attending school regularly ... the children that bounce from shattered home lives to state care, and too often into gangs and eventually the criminal justice system ... those who start on a youth benefit, and who, according to the latest official analysis, are expected to spend an average of 24 years of their working life on an unemployment benefit.

“Improving these people’s lives is not only a sign of a decent country, it’s a recipe for safer communities and a stronger economy.”

She said this would require being prepared to stop well-intentioned programmes that didn’t work, and being “hard-headed about getting people off welfare and into work and getting kids to school”.

“I see too much untapped human potential in New Zealand,” she said. “The year ahead for the New Zealand economy may well be a slow grind - it will take some time to banish inflation.”