Which side of the fiscal hole debate are experts standing on?


The Finance Minister did not back down over his analysis of Labour’s budget on TVNZ1’s Breakfast.

Steven Joyce’s so-called fiscal hole is causing a rift, with economists unable to find the alleged $11.7 billion gap, but National’s financial leaders insisting it exists.

On Monday, National finance spokesman Steven Joyce launched a stinging attack on Labour, aimed at discrediting the party’s fiscal ability.

The attack came with the allegation Labour had an $11.7 billion hole in its fiscal plan. Labour finance spokesman Grant Robertson quickly defended the numbers, saying Joyce intentionally misinterpreted the party’s operating allowance.


National finance spokesman Steven Joyce is still standing precariously close behind his hole.

However, Joyce has refused to back down, saying he staked his financial reputation against those who have said the hole doesn’t exist.

* Desperation on campaign trail
* Politically Correct: The deadly serious numbers game
* Pattrick Smellie: It’s arithmetic, stupid!

So let’s have a look at where the experts stand and whether this is a case of Joyce digging himself a hole.


National says Labour has an $11.7 billion hole in its fiscal plan which would lead to significantly higher debt, but Labour says its numbers are robust and National is misleading voters.


National finance spokesman Steven Joyce

On Monday, he said: “The Labour Party has an $11.7 billion hole in its fiscal plan that blows its debt out and breaks its own budget responsibility pledge.”

Bill English is standing behind his numbers man. But he's in the minority.


Bill English is standing behind his numbers man. But he’s in the minority.

On Tuesday, he said: “So Labour either have their budget allowances wrong or they’ve simply left out billions and billions of dollars of government spending in future years from their plan.

“One of these things must be true and either way they have an $11.7 billion fiscal hole. Their plan is fatally flawed and would lead to billions and billions of extra taxes or debt.”

On Wednesday, he said: “They made some fundamental errors and I actually corrected those for them. And now they’ve changed their story, and said they’ll have zero Budgets outside of education and health for the next two years.”

ANZ Chief Economist Cameron Bagrie. Verdict? No hole.


ANZ Chief Economist Cameron Bagrie. Verdict? No hole.

National leader Bill English

English said the fiscal hole exists and he backs his team.


BERL chief executive Ganesh Nana is standing behind Labour's figures, which his company assessed.


BERL chief executive Ganesh Nana is standing behind Labour’s figures, which his company assessed.

ANZ chief economist Cameron Bagrie

Bagrie told Newshub there’s no hole.

“But [Labour] don’t have a lot of money to play with in the 2019 and 2020 budgets. They’ve basically computed up front to what they are going to do for three years. That’s fine but the wheels of government still need to turn and be funded.”

Economist Shamubeel Eaqub also says he can't see the hole.


Economist Shamubeel Eaqub also says he can’t see the hole.

BERL chief executive Ganesh Nana

“In essence, the alleged ‘hole’ is a fiction arising from a disagreement over definitions…. We stand by our work.”

Economist Shamubeel Eaqub

Financial commentator Pattrick Smellie says there's a crack there, probably to the tune of $4-6b, not $11.7b.


Financial commentator Pattrick Smellie says there’s a crack there, probably to the tune of $4-6b, not $11.7b.

​Eaqub said there wasn’t an $11.7b hole, “from what I can see”.

New Zealand Initiative research fellow Sam Warburton 

“It looks like National’s mistake came from only looking at the operating allowance and expecting to see a greater amount of flexibility for future expenditure, eg inflation. Labour has effectively said ‘we’ll book in some of that future expenditure now’. Whether providing that certainty to Health and Education now is best or keeping things more flexible in case of unknown future demand or events is best is a judgement call. But there is no $12 billion hole,” Warburton told Newshub.

Public policy and economics data journalist Keith Ng

“Ultimately, there is no missing money. The money is accounted for… it’s literally a question of whether you put the numbers on row 239 or row 228 in the spreadsheet,” he wrote in The Spinoff.

“I know the question of whether to preallocate forecasted future operating spending to an expense category is contentious, fraught with emotions and deeply entrenched beliefs, but we must remain calm and hold on to the deep truth that, despite our accounting differences, we are one nation, under one crown account.”

Newsroom Pro editor Bernard Hickey

“There is no hole in Labour’s fiscal plan. It’s just a political argument about cost inflation and spending priorities.” 

Stuff deputy political editor Vernon Small 

“What we have here is a small unallocated spending pot and poor word choice by Labour and a huge over-reach for a political hit by National. Labour has about $900m to spend through to June 2020 on things either not in the Treasury forecasts nor in the spending plans they have already announced. That’s very tight, but not impossible if you remember National ran a couple of years of ‘zero budgets’. But there is no $11.7b hole in the fiscal plan.”

Economic Columnist Brian Fallow

“In terms of the argument, Robertson is right, and Joyce is wrong… The money isn’t missing”, he told RNZ.


Financial commentator Pattrick Smellie

Smellie said they’re both wrong, and the truth is likely to be somewhere in the middle.

“Joyce has claimed a worst case scenario. Robertson is claiming best case.

“On that basis, it’s entirely reasonable to split the difference in the interests of trying to explain what’s at stake here, and to conclude that Labour’s forecasts will turn out to be anything between $4b and $6b short of its published fiscal plan, should it form a government after September 23.”

The Taxpayers’ Union

The Taxpayers’ Union says National is partially correct. There’s a hole, it’s just not a gaping, $11.7b hole.

Stuff’s leaders debate, hosted by political editor Tracy Watkins and Stuff’s South Island editor-in-chief Joanna Norris, will be streamed live on September 7 at 6pm.

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