2023, as forecast in 2019

At Budget 2019, Treasury put up projections through 2023. 

According to those projections, which incorporated Treasury's best guesses about everything that was going into the Budget, Core Crown tax revenue would be 28.8% of GDP in 2023. Core Crown expenses would also be 28.8% of GDP. 

Covid happened in 2020 and all bets were off for that period. But Covid-spend has now largely worked its way through. Spending should be getting back to what was forecast for 2023 in 2019, right? 

Nope. 

Core crown tax revenue at the Budget Economic and Fiscal Update 2023 was 29.3% of GDP and Core Crown Expenses were estimated at 32.5% of GDP. So spending in 2023 is more than three percentage points of GDP higher than the government had forecast in 2019. 

I covered a bit of this at the Financial Services Council conference last week in Auckland; Jarod Kerr and I were on a Chief Economists' panel with Jack Tame. 

RNZ this morning gave a fairly soft ride for the Public Service Association's rep on ACT's proposals around cutting government spending, with the PSA noting that population increase has mattered and that demands for services are higher.

It would perhaps have been helpful if RNZ had provided that minor bit of context. As a percentage of GDP, core crown expenses are more than three percentage points higher than Labour had planned on in 2019. Percentage of GDP will catch migration and inflation. 

The fights between ACT and National, and Labour/Green, on appropriate size of government are one thing; it's in part a value judgement. 

But government is currently spending more than three percentage points of GDP more than the Labour coalition had forecast in 2019. 

It's a very substantial increase in the government's share of the economy.

Even getting back to what Labour had promised the path would be gets portrayed as terrible cuts. Was the 2019 path really that draconian?