Analysis by Keith Rankin, 27 February 2026.
I heard this on RNZ News 11am 12 Feb 2026:
“The government’s finances are in better shape than expected due to lower [government] spending and a higher tax take. Treasury figures … show a deficit of $5.2b for the six months ended December, almost $1.6b below the half-year forecast. The tax take was $138m higher, while expenses were about $1b lower, because of lower spending on core government services: health, housing programmes, and the cost of carbon units. Net debt was slightly lower than expected, at 43.5% of the value of the economy.”
It was framed as good news, or at least as “better” news: government spending less than expected (despite the many dire needs for more, better funded, government-funded services and infrastructure) and a higher tax take (despite the needs of many people to have more spendable dollars).
I mention this quote from economic historian Adam Tooze, from his 2018 book Crashed, re the downward spiral that arises from policies of fiscal consolidation.
“Not only was [Greece, in 2010] slow to push through the changes the Troika demanded, but when it did the results were counterproductive; in a classic Keynesian downward spiral, demand fell and unemployment surged further, reducing incomes.”
We note that when private incomes are reduced, then income tax receipts are also reduced, meaning government income is reduced. (In idiomatic vernacular, this is known as cutting your nose to spite your face. “The idiom is often used in political and economic commentary to describe actions by a political actor, party, corporation or nation that appear to damage the actor’s own interests”.)
New Zealand is lucky at the moment in that it is benefitting from record high terms of trade – external stimulus, a commodity-led export-led boom – which is to some extent offsetting the fiscal doom loop that Tooze describes.
What will happen when those record-high export receipts fall-off? Tooze tells us: “a classic Keynesian downward spiral”.
Note that Greece was doing these policies, not out of political free-choice but because the EU Troika demanded that Greece follow this counterproductive policy path. At least Greece resisted, conferring upon itself some dignity.
New Zealand is today implementing similar policies; partly because the government is nominally free to choose, but also because it is heavily influenced by the false narratives peddled by another powerful Troika: the New York troika of Standard and Poor’s, Moody’s, and Fitch. New Zealand governments would rather lose elections than get on the wrong side of these big three.
Democracy or empire?
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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.
