"We don’t have the largest overall structural deficit among advanced countries, but there aren’t many worse than us." [Updated]

"New Zealand’s fiscal position doesn’t look good. Last year’s Budget slightly widened an already uncomfortably large (estimated) structural fiscal deficit. ...

"[T]his is a measure of the primary deficit (ie excluding net interest) not the overall balance. ... [T]he overall deficit ... it is a reflection of past choices. The primary balance is a reflection of current policy choices. ...
[T]he chart ... shows New Zealand [is] estimated to have the highest cyclically-adjusted primary deficit of any advanced economy this year. ... We used to be better than the average advanced economy. Once upon a time, not so long ago. But not now. ...

"There can be a case for cyclically-adjusted (or structural) primary deficits, even large ones. Wars, for example, are often financed by a mix of debt and taxes. Pandemics can be another example – big disruptions to output and activity almost from out of the blue – and so no one really quibbles much over primary deficits in (calendar) 2020 and 2021.

"But we don’t face a war or a pandemic. Our politicians – first Labour and now the National-led coalition – have simply chosen to run large primary deficits. ... 

"In case you are wondering about the overall structural balance picture, here is that chart:

"We don’t have the largest overall structural deficit among advanced countries, but there aren’t many worse than us.

"And we are heading in the wrong direction. ...

"These New Zealand structural fiscal deficits aren’t some consequence of Covid but a series of choices to act, and not to act, by both governments in succession. ...

"[B]ack ... when we had feeble productivity growth and weren’t closing the gaps on the rest of the advanced world we had an enviable record of fiscal stewardship. These days, productivity and real GDP per capita growth is [still] lousy, and we are running big deficits and rapidly increasing debt.

"It is a choice, but it is a bad one."

~ Michael Reddell from his post 'Fiscal failure'

UPDATE:

Looking for signs of a form improvement, Reddell notes that in Finance Minister Nicola Willis's pre-Budget Speech this morning "although there is talk of a 'significant savings drive' freeing up 'billions of dollars' ... there have been no announcements of things the government is going to stop spending money on, or of agencies/departments it is just going to close down." And: "it sounds as if more handouts are still part of the plan."

We should no doubt be thankful for small mercies – this morning’s announcement may be one – but the outstanding imbalances are large and do not yet seem to being addressed seriously. Those imbalances are bad, both absolutely and in international comparison terms. They are political choices. Unfortunate ones.