"When Labour took office in 2017, Core Crown tax revenue was 27.5% of GDP. It is forecast to hit 29.1% of GDP in 2024 and 30% by 2028...
"Covid did not just increase government spending to deal with the pandemic. It also seems to have ratcheted in a very substantial increase in the overall size of government. In December, Treasury forecasted [the National-led] government's spending, as a fraction of overall economic activity, to be more than two-and-a half percentage points above Labour’s longer-term promise in 2019. ... even though Ardern’s budget [then] was hardly austere. ...
"Getting government spending back down to the longer-term proportions of GDP that Prime Minister Ardern’s wellbeing agenda had promised in 2019 hardly seems radical or austere. It would simply be a getting-back-to-normal after a crisis.
"Getting core government spending down from Ardern’s promised 28.8% of GDP to the 27.7% of GDP that Bill English’s National-led government bequeathed to the incoming Labour government would not be radical either. It would be the normal partisan shifts in the relative size of government that come with changes in government.
"Keeping these things straight matters....
"[D]ecades ago, economist Robert Higgs warned that post-crisis retrenchments may be wishful thinking.
"Professor Higgs looked at American government spending over the Twentieth Century and found a worrying pattern. Every crisis brought a sharp increase in government spending to deal with the crisis. But, after the crisis, spending would only partially retrench before expanding even further during the next crisis.
"And so, a one-way ratchet effect meant a continued increase in the size of government. A lot of ground can be covered over decades of two steps forward and one step back. ...
"Getting post-Covid spending back to what Prime Minister Ardern had promised in the first Wellbeing Budget is hardly austerity. It should be the least that fiscal conservatives should expect."
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