It fell on Max Key to pose a brilliant question to the PM at a Business NZ event. He addressed the single biggest issue confronting the nation. Max started by saying he wanted to ask about "intergenerational fairness". Then he went on to enquire as to whether the PM was "concerned" about how the cost of the build-up in Government debt will have to be repaid by young Kiwis. His specific words were, "Do you think that this is fair?"

However PM Ardern poured ice cold water over government debt levels being any cause for concern whatsoever, stating that "NZ will live within its means" and "is making decisions that will put us in good stead for future generations".

By saying so, she has led Max (and all young people in the nation) up the garden path. He is right to be concerned. The PM's comments are outrageously misleading. Where's the proof? Her words are in direct contradiction to her own Treasury's Long Term Fiscal Statement. That report, issued last September, shows how the explosion of Kiwi healthcare & pension costs, partly due to population ageing, is putting “debt on an unsustainable trajectory”. Had the PM put up the Treasury chart (below) to the Business NZ audience then their eyeballs would've popped out:

Eight pages of the Long-Term Fiscal Statement are dedicated to ‘Raising Tax Revenue’ as a means to reign in spiraling, out-of-control debt. The document “explores” how to “increase revenue by up to 8% of GDP to accommodate fiscal pressures”, saying this could be done “by increasing [existing] tax rates, or by broadening the tax base to which the system applies, or by introducing new kinds of taxes”. Yes, new taxes.

So Max got it exactly correct. Treasury has confirmed the younger generation WILL pay for the spiraling bills of the older generation, primarily for their health-care & pension costs. That's only half the story. The other half is that these projections are outdated - things have worsened over the past year as interest rates have risen & will go higher still.

The PM's response contradicting Max is not even wrong only over the long-term time horizon outlined in the Treasury Statement - it is wrong right NOW. Why? Since the young are currently paying higher taxes to help pay off our public debt due to tax brackets not having been adjusted in line with wage growth.


Way back in the middle of last year, we were forecasting high inflation in NZ, fully breaching the country's agreed targets, at the same time as the RBNZ & Finance Minister were not. We questioned the Monetary Policy Committee's repeated characterization of Kiwi inflation as "transitory". We have long disagreed with the Finance Minister's assertion that most of our inflation is being driven by external shocks completely outside of his control.

Now a former Chair of the US President's Council of Economic Advisers and Head of the Harvard Economics Department, as well as author of the world's most popular economics textbook, Greg Mankiw, is arguing along similar lines. Last Friday he asked:

"A common story about the recent inflation surge in the US - especially among members of Team Transitory - is that the surge is largely due to global supply shocks, such as rising energy prices, chip shortages, and various bottlenecks in the wake of the worldwide pandemic. Why then do we not see a similar inflation surge in Japan? There, inflation is running at about the same rate as it was pre-pandemic (see below)":

I can fully understand the Finance Minister politicizing the causes of high inflation in NZ. He's a politician! But why is the RBNZ also politicizing the causes? Why isn't it doing proper research to work out what is behind our 7% inflation figure? Why is the Bank not connecting it whatsoever with its $53 billion Quantitative Easing Program? Isn't it the job of the RBNZ to find out the truth - with the public interest in mind - rather than acting like a political party?



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Robert MacCulloch