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Is National really better than Labour with the Government books? Well, not really

National's Steven Joyce (right) would have NZ believe Labour's Grant Robertson (left) doesn't have the required level of fiscal capabilities.

ANALYSIS: Every three years it seems National rolls out the same accusation: Labour is less fiscally responsible.

This so-called commonly held belief has again been used as a fallback during this election campaign.

It reared its head amid Steven Joyce's accusations that Labour had left an $11.7 billion hole in its fiscal plan.

The Helen Clark-led Labour Government did a good job at reducing debt.

In the aftermath, National said even if there wasn't a $12b hole, Labour wasn't leaving itself much financial wiggle room. This was followed by the suggestion those tight Budgets were likely to put a Labour Government in the red because the party's fiscal track record isn't up to snuff.

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But is National really a steadier hand when it comes to controlling the Government books? Is a vote for Labour actually a vote for financial instability?


But John Key's National Government had the aftermath of the GFC and the Christchurch earthquakes to deal with.

The short answer is no.

We took a look at some basic economic indicators, including net debt as a percentage of GDP and surpluses, under the Helen Clark-led Labour Government as well as the John Key-led National Government.

What we found wasn't what National would have us believe.

Clark's fifth Labour Government reduced debt from 22.6 per cent of GDP in 2000 to 5.5 per cent in 2008.


That same Labour Government went from a $386 million deficit in 2001, to a $2.8b surplus in 2008.


During Key's National Government, debt as a percentage of GDP went from 9.1 per cent in 2009 to 24.6 per cent in 2016.


But these numbers don't paint the whole picture when it comes to who's better with the books. 

Economic factors like the global financial crisis (GFC) and the Christchurch earthquakes put huge financial pressure on Key's Government.

In these types of crisis situations, a government will often run a deficit to keep the economy afloat and spare households pain.



Victoria University School of Government research fellow Toby Moore said there was not one single measure on which a government's fiscal policy should be judged.

It was important to understand fiscal policy and public debt were means to other social or economic objectives. They were not ends in themselves.

"People's lives are not automatically made better or worse when public debt goes from 20 per cent of GDP to 15 per cent, or 25 per cent," he said.

For example, a government could incur debt to invest in infrastructure, which would benefit future generations and create a valuable asset on the other side of the balance sheet. So net public debt would not increase, even though gross public debt did.

What we spend money on, and the circumstances in which we spend it, matter hugely when it comes to judging fiscal policy.

"But even on a simplistic measure of fiscal responsibility, the accusation that Labour is less fiscally responsible does not match the recent historical record," Moore said.

The Clark-led Government was very cautious when it came to finances, and put New Zealand in a much stronger position in terms of public debt than most other advanced countries when the GFC occurred, he said.

New Zealand did have a concerning build-up of debt during this period — but it was on the part of households, not the Government.


Economist Brian Easton said there were so many exceptions and anomalies it was near-impossible to come to any universal generalisation about whether National or Labour was better with the books.

"Over the long run I can think of prudent fiscal stances on both side (Savage-Fraser for Labour, Holland-Holyoake for National), and some dreadful ones (Roger Douglas for Labour, Robert Muldoon for National), often obscured by the way the accounts were presented." 

Looking at recent governments, Clark's finance minister Sir Michael Cullen squirreled away savings, paying off debt and using the surplus for investment. 

On the other hand, international conditions were much less benign under the Key-English Government, so National "cannibalised" a lot of the Cullen reserves to ease us though the GFC, Easton said.  

The record showed their debt track was higher than Cullen's but perhaps forgivable in the circumstances.

Moreover, they were running a surplus of current revenue over spending, and using the surplus to build infrastructure.

Based on past performances, both major political parties are able to competently run the country's financials, they just have different priorities.

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