An economic think-tank says Labour’s more conservative approach to government spending is much needed.

The party’s fiscal plan has promised to keep net debt under 30% of GDP, which finance spokesperson Grant Robertson said they are on track to meet, with independent endorsement from Infometrics.

Operating balance before gains and losses (OBEGAL) is forecast to reach a $2.1 billion surplus by 2026/27, with net debt peaking at 22.8% of GDP in 2024/25 before declining.

It will also prioritise spending in public services to build a stronger and more resilient economy that delivers high-wage jobs and transitions into a low-carbon future.

Labour has already ruled out a wealth tax and a capital gains tax this election season, with Prime Minister Chris Hipkins warning the next government will face tighter budgets post-covid, and cost pressures eating into spending.

New Zealand Initiative had urged the more conservative approach, saying Labour’s “optimistic” fiscal projections in 2017 resulted in an $18 billion discrepancy between intended and actual spending by the end of 2019.

Executive director Oliver Hartwich told Mike Hosking the party was spending well beyond what was planned pre-Covid at $29 billion more by 2019, but Covid opened all the floodgates.

“Suddenly there was spending like there’s no tomorrow. Then once Covid was over, Labour kept the spending levels at the level that they were at in 2020.”

The think tank also noted that spending hadn’t dropped to pre-Covid levels, with PREFU forecasts in 2023 showing spending from 2024 to 2027 will match the first year of the pandemic.

Hartwich said the debt incurred over the past six years should be repaid.

“For the extra spending in just Labour’s five years, we would need five months of all the tax revenue in this country to repay that debt.”

ACT leader David Seymour has blasted the plan, calling it “vague promises of fiscal responsibility” and a lack of respect.

He said PREFU’s forecasting of $11 billion more in spending by 2026 than in 2022, and would lead to more borrowing and see net debt hit $100 billion by 2025.

ACT’s alternative budget promises to decrease net core Crown debt, leading to smaller deficits each financial year until 2026, and a larger surplus by 2027.

Meanwhile, National is set to release its own independent fiscal plan on Friday as its Finance spokesperson Nicola Willis questions whether Labour can deliver the fiscal plan.

Infometrics hadn’t costed for Labour’s individual policies and promises National will borrow in unexpected events, which will pay down debt quicker, she said.

It comes after BusinessNZ’s Economic Conditions Index for the September quarter projected a gloomy outlook for the economy, with growth over the next year likely to be marginal.

It’s also projecting global economic growth to slow over the next five years. Decreased demand and election uncertainty have led to caution from investors.

Advocacy director Catherine Beard told Tim Dower there are a number of factors at play, most notably persisting inflation, lasting until probably 2025.

“That really impacts on consumer confidence and consumer spending which flows through into businesses as well — it impacts on demand for them.”

China’s economic situation is another huge player, which will also see modest growth continue for years.

Other big players include the cost of oil rising due to supply cutbacks adding to cost pressure, and the Reserve Bank rising interest rates to tackle inflation.

Beard said debt has been increasing significantly since 2017, but it’s been growing pre and post-Covid.