The Opportunity Party is a political party founded in 2016. It exists to enact policy that affords every Kiwi equal opportunity to pursue their potential, in ways that are socially, economically, and environmentally sustainable. It aims to address challenges at a fundamental level, rather than tinkering at the edges.

We wish to make the following comments:

The operating deficit

Current fiscal challenges are the result of successive governments’ failure to address a simple tradeoff: funding services requires raising tax revenue. Structural factors such as demographic change and the worsening impact of climate-related weather events will only increase the strain on the current imbalance between the public services New Zealanders enjoy and the taxes they pay to fund these. 

Addressing this imbalance requires either increasing Crown revenue or reducing public services. This Government, like many before it, has failed to meaningfully address either, instead presenting increasingly fanciful growth projections or exaggerating the potential of “doing more with less”. 

This Government’s ostensible cost-cutting has had to skirt around the largest and fastest growing sources of Crown expenditure. This has left it making cuts that are small in the context of addressing the structural deficit, but increasingly painful because they are limited in scope. Many are also damaging to New Zealand’s long-term growth prospects and the legacy we will leave for future generations. 

Opportunity agrees with the Minister of Finance that meaningful cuts to core public services offer a mathematical solution to the structural deficit, however, they also promise to impose a level of human misery that New Zealanders will not stomach. Nor should they. Instead, the Minister needs to consider the matter of revenue.

Talking about tax

The OECD has consistently identified the need for New Zealand to broaden its tax base in order to address persistent structural deficits. There are many options available. The glaring gap in our tax base is our treatment of capital gains, especially those from property. 

Opportunity favours a comprehensive land value tax combined with a restructuring of income tax centred around a universal income. This solution would enhance the progressiveness of the tax system overall while robustly addressing overallocation of capital to residential property. 

Capital investment and infrastructure

New Zealand simultaneously spends a lot on infrastructure yet desperately needs more. The solution to this conundrum is two-fold. Firstly, the slow moves taken by both this Government and its predecessor to set infrastructure funding on a longer-term non-partisan footing should be accelerated. A stable approach to infrastructure spending (including both new projects and maintenance and upgrading of existing infrastructure) will enable the long-term planning and large-scale private investment needed to create a more efficient and sustainable sector. 

New Zealand’s overall balance sheet position remains comfortable. Judicious debt-funding of infrastructure therefore remains a viable - and necessary - path to sustained economic growth. 

Productivity and growth

In the longer term, maintaining the standard of living New Zealanders expect will require economic growth that is built on robust and sustained productivity gains, rather than asset price inflation and depletion of non-renewable resources such as fish stocks and fresh water.

There is no silver bullet to lock in productivity growth. However, the above commentary points to two elements that would reliably contribute to sustained and productive growth:

• Addressing imbalances in the tax system to unlock capital from over-investment in property, and
• Establishing a consensus around a well-justified long-term infrastructure pipeline and committing to fund this (including through Crown debt) 

In addition, there is a range of evidence-supported structural reform measures that can reliably be predicted to contribute to lifting productivity and growth in the long-term:

• Energy sector reform and direct investment to secure stable and abundant supply of energy for consumers and businesses
• Competition reform of economically critical sectors like banking, supermarkets and building supplies
• Stable and strategic long-term funding of science and the innovation system that helps to convert knowledge to economic growth
• Firm-level support to improve research and development outcomes, skills development, technology uptake, and general business capabilities, particularly in SMEs

We wish to make the following recommendations:

• Address the structural deficit in a more robust, long-term manner by broadening the tax base through a mechanism such as a land value tax;
• Invest in New Zealand’s long-term future by working on a non-partisan approach to long-term infrastructure funding and increasing Crown capital expenditure, especially on renewable energy and related infrastructure, climate change mitigation and adaptation measures;
• Establish a credible plan to lift productivity and growth in the long-term through structural reform measures such as energy sector reform and investment, competition reform, science and innovation funding, and firm-level support.