Before the 2020 election, Finance Minister Grant Robertson must decide if Labour will stick with the Budget Responsibility Rules, or ditch them. Jason Walls says this will be a hugely significant decision

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Grant Robertson by Jacky Carpenter.

By Jason Walls

“This wouldn’t happen at Hogwarts,” read the sign of a young girl on Parliament’s doorstep on Wednesday.

She was standing alongside hundreds of other teachers, students and parents pleading for the Government to increase teachers’ pay and to better resource schools across the country.

As they stood, huddled in solidarity singing Twisted Sister’s We’re not going to take it outside the Beehive, the Prime Minister made a surprise appearance to address the crowd.

“I wasn’t scheduled to be here,” Jacinda Ardern said. “But I was sitting up in that office in a meeting and I could see you streaming to Parliament and I thought ‘I cannot, not be here.’”

She was received well by the crowd, despite the fact her Government had refused to meet the teachers’ union’s request for a 16% pay increase.

Weeks before this, the Government was locked in negotiations with nurses.

Although a deal was hammered out, Minister of Health David Clark told reporters there was “no money on the table to increase the salary package for nurses.”

“We want to manage the economy prudently,” he said.

This comment, and the Government’s approach to its books and the economy during the negotiation process, drew a lot of flak from the left.

At the heart of the criticism was the Government’s commitment to its Budget Responsibility Rules of getting net Core Crown debt to 20% of GDP and keeping Core Crown spending at roughly 30% of GDP.

BNZ, ANZ, BERL and Bagrie Economics all say the 20% target is “arbitrary.”

Many on the left have called for the Government to abandon the debt target as New Zealand wades into choppy economic seas.

But the Prime Minister has insisted the rules aren’t going anywhere.

At least, not for now.

Caught between a rock and a fiscal hard place

Labour and the Greens committed to the rules before the last election.

New Zealand First accepted these fiscal terms and conditions when it became a coalition partner last year.

But the rules expire at the end of this Government’s term. Before the next election all three parties will have to decide if the rules will stay or go.

And the way things are panning out now, the argument for the latter seems to be the strongest.

Both NZ First and the Greens have suggested there is room for the debt limit to be notched up.

The impact on New Zealand’s credit rating would be almost non-existent, as long as the increase was not too significant, according to both Moody’s and S&P.  

As the rules have been such a thorn in the side of the Government, they would likely take centre stage in any Coalition arrangements.

Finance Minister Grant Robertson would let Labour’s plans be known well ahead of any coalition talks.

And it is here where Robertson will be caught between a rock and a fiscal hard place as both options have their drawbacks.

To indicate Labour wants to make no changes to the rules would see fall out from the left, who think increasing debt to pay for the “nine years of neglect” is the Government’s duty.

To appease its base and the wider left wing by suggesting Labour would be in favour of increasing the debt and spending limits would leave Robertson and Ardern wide open to attack from National.

The rhetoric from the Opposition would be nothing short of a wall of noise, with 56 MPs paining the Government as irresponsible fiscal managers.

Robertson is damned if he does and damned if he doesn’t.

Regardless of which decision he makes, what happens with the Budget Responsibility Rules is likely to play a critical role in the 2020 election.

But one thing is for sure.

None of this would ever happen at Hogwarts.

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