Political & Economic week that was: Government ramping up capital investment

Click the NBR Radio box for on-demand special feature audio: Rob Hosking breaks down the political and economic week that was

The government signalled it is loosening some of its previously tight hold on the fiscal purse strings, with Finance Minister Bill English announcing a surge in capital investment projects.

The increase is not totally expedient – New Zealand has never, under any government, taken a systematic look at future investment and infrastructure needs but the Treasury has, since 2010, been building up a picture of where those needs are going to be over the next decade.

The finance minster's announcement is, therefore, good economics, at least in principle.

But anyone unable to see a strong political element here probably should not be allowed to operate any heavy machinery for a while.

The government is under pressure for being a little too tightfisted: with rising unemployment, in particular, starting to be felt in some areas, there is a need to be seen to be doing something.

Details of where the extra investment is to come will emerge in Budget 2016 – or, more likely, in strategic dribs and drabs in the months before that Budget.

But it is a fair bet much will be focused on Auckland – housing and transport will feature prominently.

It also appears the mammoth Inland Revenue ICT business transformation project is already having its pace of delivery ramped up.

That is going to have an effect not just on how New Zealanders pay their taxes but also how they interact with government overall.

The other economic data this week was yesterday’s GDP figure, which was not only slightly better than expected for the quarter to September but it revised up growth last year by nearly a half a percentage point.

Of particular note is the surge in business investment – after a brief lull – and the strong performance by manufacturing and services. 

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