In this morning’s edition The Post has a double-page article about what Nicola Willis might be like as Minister of Finance. Those of my comments that were included are here

My bottom line was actually very similar to that of CTU economist, Labour champion, and former political adviser to Grant Robertson who was quoted as saying that only time will tell whether Willis makes a good finance minister, specifically “you don’t master these things overnight”. That said, I was a bit less impressed by the one campaign event I saw her at (the Stuff finance debate). I’m anything but a fan of Robertson – I think he ends up having been the worst Minister of Finance New Zealand has had in the post-liberalisation decades – but I thought Robertson had the better of her. Despite the government’s poor economic record and Willis’s apparent past debating prowess, perhaps 9 years’ experience as Labour’s finance person counted?

Willis comes to the job with relatively limited experience in the portfolio. Contrast her 18 months as the spokesperson with the 9 years Michael Cullen had before taking office (having sat in Cabinet for three years before that), or the similar background Bill English had had by 2008 (he hadn’t been spokesman for that long, but had briefly held a finance portfolio late in the previous National government). David Caygill and Steven Joyce both came to the job late in their respective governments’ terms, having served as senior economic ministers for years previously. Willis’s record is perhaps closest to that of Grant Robertson (neither had an economics background, and Robertson had had only 3 years as opposition finance spokesman). Neither has ever run anything much previously either, so again there isn’t a great deal to go on.

One might think of three aspects of the role of Minister of Finance:

• senior political operator and parliamentary figure,
• manager of the government’s finances,
• lead figure in overall economic strategy.

The first of those isn’t really my territory.  But it was probably where Robertson did best.  He seemed to be a very effective figure in the House and a formidable debater etc.   That isn’t nothing, especially when (as they will, for any government) things go badly at times.    Perhaps Willis will be similarly effective (she was, like Robertson, primarily a political operative by background).

But beyond that it is very hard to know.  One could mount an argument that at least in the first couple of years Robertson didn’t do a bad job at all managing the government’s finances (the left thought him far too disciplined), but he’d inherited a fairly easy position (budget surpluses, unemployment falling etc).  The problems really became apparent once the worst of the Covid disruptions were over, and instead of insisting on steering a path back to surplus (in an overheated economy), Robertson presided over additionally expansionary budgets both last year and this, such that he bequeaths large deficits in a country that for 25 years had largely avoided them.   There seemed to be an inability or unwillingness to say no (and that in a government with no pressures from coalition etc parties).

How will Willis do in that role?  There really is no way of knowing at this point.  No doubt officials in Treasury have been beavering away for weeks preparing advice for an incoming Minister of Finance, one who plans to bring down some sort of mini-Budget within what will be not much more than her first five weeks in office, and will quickly have to focus on next year’s Budget.  But as to what hard calls she is willing to make, or to insist on (both her Prime Minister and the other parties will have different views on things) no one knows.  There is no track record (or nor really can there be, especially when neither she nor Luxon has previously served as a minister). 

I’m not overly optimistic, including because of the reluctance to put the seriousness of the fiscal situation front and centre during the campaign, preferring to run a campaign in which –  like Labour’s – (faced with large deficits) it was more a contest of who had had the shiniest new baubles to bribe voters with, financed by proposed tax changes that –  like Labour’s –  had little no economic merit, and around which there were also serious questions about the revenue they might raise.    As to the foreign buyers’ tax business, my unease was less about whether or not the revenue estimates are roughly right –  in macro terms it was always second order –  than about the way she and her leader handled the issue, refusing transparency, refusing to release any of the modelling, relying on “trust us” assertions when it wasn’t particularly obvious why – with the best will in the world – we would.  Verification helps underpin trust, and there was none of the former.

Being Minister, backed by a phalanx of Treasury staff and analysis, is different than being opposition spokesperson in a campaign.  But it isn’t Treasury that makes the hard political calls (and too often in the last few years Treasury itself seemed more inclined to favour bigger government over balanced budgets).  There is clearly now some political mood for restraint – even Labour seemed to get it in the last few weeks – but how well, and for how long, will that shape Beehive decisionmaking when the pressures from the numerous vested interests (of all sorts) mount?

My own unease is greatest around that “lead figure in overall economic strategy” role.  There will be other senior ministers no doubt, but a Minister of Finance who is deputy leader of the main governing party should be able to be looked to as the key player in this area.   And it is where, in her time as finance spokesperson, there is little sign that she has any more credible a model –  or any more substantive interest –  than Grant Robertson had for (for example) reversing the decades of economywide productivity growth failure.   We shouldn’t look to the (any) Minister of Finance as some sort of economic guru, but there is little or no sign that Willis is greatly interested or has made any effort to surround herself with advice, expertise, or even active debate about what might be needed.  The risk is that holding office will be sufficient, rather than doing something much in it.  There is, of course, the 100 point economic plan (which when I read it I probably agreed with a majority of the items in it) but a list that long really is a list rather than a strategy backed by a compelling narrative.  And it isn’t as if The Treasury seems to have much to offer there either (as distinct from narrower expenditure control stuff).

Who knows. We’ll see before long I guess.  If I’m “not a big fan” –  and I’m not –  it is a long time since I’ve had much confidence in any senior New Zealand political figure (or most of their top bureaucratic advisers –  an issue for Willis since The Treasury is weakly led, and entities she will be responsible for like the Reserve Bank and Productivity Commissions are worse. What, if anything, she is prepared to do about the leadership of these three agencies will be an early test).   It would be great to be pleasantly surprised.

(In the snippet above I included Bryce Wilkinson’s comments, partly because he runs a quite different line about Michael Cullen than the quote from me.  The background to my own comment was the observation that one didn’t need to have an economics background to be an effective Minister of Finance.  Cullen’s politics were very different to my own, but I have here several times defended his fiscal management, noting that he proved to have been very badly advised by Treasury, which told him that even in the face of expansionary budgets late in his term the Crown accounts would remain in operating surplus over the forecast period.  That proved to be very wrong, but it is The Treasury that is paid to do the numbers and provide those reckonings.  A couple of posts on that are here and here.

All that said, when I wrote about Cullen’s book I ended the post this way

Those last few lines are the sort of thing that could fairly be said of pretty much all our Ministers of Finance for decades.  

It would be great if Nicola Willis were to be different.  But there aren’t yet many positive straws in the wind.