Labour leader Chris Hipkins says the country will need to borrow more to keep up with the demand on infrastructure. Photo: RNZ / Angus Dreaver
New Zealand cannot afford tax cuts and must borrow more money to bring infrastructure up to scratch, Labour leader Chris Hipkins says.
He said the nature of the investment would justify the borrowing.
"If you're borrowing to invest in things like infrastructure that you're paying off over the lifetime of the asset that you're investing in, then that can be justified," Hipkins said.
In order to fix water pipes, upgrade the roading network, the rail system, Interislander ferries, hospitals, and schools, Hipkins said: "We are going to have to borrow money to pay for those things and I think that that's absolutely justified."
Hipkins defended Labour's investment in the Auckland Light Rail project that cost taxpayers millions but never took off.
He said capital expenditure had operating expenditure associated with it, and "the National Party massively underestimated" it.
National had created a fiscal hole, Hipkins said.
"We can't afford to pay for the tax cuts that they're paying at the moment. The big tax breaks for landlords - the country can't afford those at the moment if the government are going to deliver on the other commitments that they've made around things like infrastructure."
Finance Minister Nicola Willis is asking workers and business owners for ideas to help boost the economy. Photo: RNZ / Angus Dreaver
However, Finance Minister Nicola Willis said the Budget would "add up just fine", delivering on commitments including income tax cuts as well as a pay rise for police.
But she said the government could not achieve its goals without buy-in from the business sector.
The government's Budget Policy Statement is due to be published soon, but Willis said the books were in worse shape than thought.
The country was "under-performing" due to its obstruction economy that had built up over decades, she said.
Last week, Kiwibank chief economist Jarrod Kerr said the government books were one of the tidiest the world.
"We have the ability to double our debt according to Standard and Poor's without getting a downgrade, so we can leverage up, we can get money at reasonable rates."
It was wrong to blame the finances, instead, execution was the problem, he said.
An independent infrastructure body could be a start, he said, with funding that had a long-term objective - "one that's not mucked around by election cycles".
