4 Nov 2011

Labour pledges return to surplus in three years

6:56 pm on 4 November 2011

The major party leaders John Key and Phil Goff are continuing to take pot shots at each other over fiscal credibility, following the release of Labour's election year costings.

Labour leader Phil Goff released the party's fiscal framework at Parliament on Friday morning, saying the party would borrow $4 billion more than National over the next four years if it is elected to power on 26 November.

Mr Goff says Labour would return the Government's books to surplus by 2014-15 and clear debt in 10 years.

The announcement comes after a week of National Party attacks on Labour's financial credibility. On Friday, Mr Key described Labour's figures as shonky, saying he'll be a monkey's uncle if the $4 billion figure is right and believes Labour will need to borrow more than $10 billion.

National will proceed with the partial privatisation of state-owned energy companies Genesis Energy, Meridian Energy, Mighty River Power and Solid Energy and reduce the Crown's shareholding in Air New Zealand if re-elected.

Mr Goff says Labour will borrow more in the short-term but won't sell any state-assets, saying dividends from them and its capital gains tax will allow it to repay debt faster in the long run.

He says this will set the economy on a sustainable path for the next 20 years and Labour will phase in its major policies over time to make them more affordable.

"We'll borrow a little more in the short term to pay for the school and the hospital buildings that National's claiming that it'll pay for out of asset sales.

"Gradually, we'll get to the position with a growing capital gains tax revenue that'll allow us to pay back that debt faster, more aggressively. The benefit is that our assets will remain in public hands and they'll continue to pay excellent dividends for us."

Labour says it would also establish a fairer tax system and keep tight control on spending.

Figures a shambles, says Key

John Key says Labour's figures are surprising, a shambles and argues that the party's true figure for its extra borrowing is more than $10 billion, because it has effectively ignored its borrowing for the Super Fund.

"Far from being accurate and show us the money, Phil Goff has shown us that he is trying to pull the wool over New Zealanders' eyes. That won't work and, in fact, they will be racking up at least $11 billion. But quite frankly, I think the $14 billion number I used the other night will be spot on."

Mr Key says Labour's pledge to borrow to invest in the Super Fund while already counting on profits from that borrowing is farcical. He says Labour is saying that borrowing for Super Fund contributions somehow don't count - but mythical future profits from the Fund do.

"Even though they're borrowing $6 billion for the Super Fund, even though it hasn't produced a dollar of profit, and even though the world's stock markets are more volatile than they've ever been, they're going to guarantee a profit and count that against today's spending - well, it's a shambles."

But Labour says its fiscal strategy is robust, fully costed and based on data from the Treasury. Economic development spokesperson David Parker says the Super Fund money will not be spent.

"(National's) tried to ping us for the amount that we put into the Super Fund and then they've ignored the asset that it purchases. How fair is that?"

Mr Parker says the Treasury predicts that returns on the Super Fund will exceed the cost of borrowing by 2.5%.

Labour says it is National's figures that don't add up - as it has not only banked the proceeds from its planned asset sales, but claims it can also keep spending all the dividends.