Economy Watch Barbara Edmonds: Rehabilitating Labour's economic credibility after the cost of living crisis
Finance spokesperson Barbara Edmonds says a re-elected Labour Government would have been willing to expand its planned public sector cuts to protect key programmes.
The tax lawyer turned MP spoke on Interest.co.nz’s Of Interest podcast about the Coalition’s fiscal policy and her role in rebuilding the Labour Party after its election defeat.
Part of that project will be rehabilitating the party’s economic credibility after presiding over a massive cost of living crisis.
Ipsos’ February issues poll showed inflation, or the cost of living, was the number one issue facing New Zealand voters and only 23% saw Labour as being best able to deal with it.
Only 22% thought it was the best party at “managing the economy” down from 31% a year ago and well below the National Party which has climbed from 42% to 47%.
The parties which have formed the Coalition Government campaigned on bringing down spending and therefore inflation, as well as cutting taxes for some groups.
Edmonds agreed there was a need to consolidate spending—which had got ahead of revenue during the past three years—but tax cuts were a bad investment.
Labour’s fiscal plan asked for up to 2% reductions in public sector budgets, while the Coalition Government is asking for up to 7.5%.
She admits her party would have had to make further cuts, given new Treasury forecasts showing tax revenue falling below pre-election forecasts.
“If we had to make more cuts, or look at different savings, in order to ensure that lunches in schools kept going … we would have had to make those decisions,” she said.
“I wouldn't apologize for making those types of choices. But what I wouldn't have done is promised really unaffordable tax cuts”.
Edmonds said the limited money available was better invested in infrastructure, schools, healthcare, public and private transport, and climate action.
Which tax?
Edmonds said she was out meeting with key sector leaders and listening to new ideas she can carry back to Labour's policy council.
Her role was to guide her colleagues through the process of developing a manifesto for 2026 and informing them about the costs and tradeoffs involved.
“If I need to say no, I’ll say no. I’m a mum of eight, I know how to say no,” she said.
“Ultimately, if I believe that it's going to put Labour into a difficult fiscal position going into the next election, I will make those views very clearly known”.
Labour recently voted against a bill put forward by Te Pāti Māori, which would have removed the GST from all food, on the basis that it was too expensive.
But the big policy question is about tax. Political opposition to taxes on capital has been the unslayable dragon of New Zealand politics.
Tax reform is back on the table but Edmonds won’t be drawn on exactly what kind.
She said it was necessary to first ask what the party was trying to achieve and then design a tax model that supported those outcomes.
The country will be facing some serious fiscal challenges by 2060 when superannuation could cost 10% of GDP and healthcare could absorb another 7%.
“2060 looks like ages away, but that’s the next generation. That’s my kids. So, we need to ask, what is the society that we want to leave this generation and how does tax help us get there?”
The Treasury and the International Monetary Fund have both made recommendations about possible reforms, but Labour would be starting from scratch based on its long-term vision for New Zealand.
Edmonds said political parties don’t win elections based on tax policy, anyway.
“You win on committing to a better health system, better education, making sure the vulnerable are supported, and that our businesses are able to grow,” she said.