A leading economist says the Government has its priorities in the wrong place by focusing on tax cuts, believing infrastructure is a bigger issue to help New Zealand's economy in years to come.
Christopher Luxon gave his inaugural State of the Nation speech as Prime Minister on Sunday where he promised to be "straight up" with Kiwis about the "fragile" situation of New Zealand and warned his Government is going to make some tough decisions "not everyone will like".
Independent economist Cameron Bagrie wouldn't go as far as saying the state of the nation is "fragile" like Luxon did but he described it as "underperforming".
Bagrie joined AM on Tuesday to give his take on the state of the nation and had a grim prediction for 2024.
He said New Zealand has an economy in a "technical recession" with a strong "inflation pulse" and warns 2024 is "not going to be great".
Bagrie told AM his biggest concern is where New Zealand is going to be in 10 to 20 years.
"When you throw the combination of infrastructure, which is poor across the country, education, is a key indicator on where we're going to be in 20 years and it's not a great omen at the moment," he told co-host Lloyd Burr.
"So, it's fair to say we've got a repair job ahead of ourselves and this is not just about the economy. The economy is what we call the economic base that wellbeing is premised but you need those social metrics; education, health and infrastructure are critical ingredients towards getting the economy back on track."
Kiwis have been battling a cost-of-living crunch for more than two years, with inflation remaining stubbornly high at 4.7 percent as per the latest figures - still above the Reserve Bank's (RBNZ) target of between 1 and 3 percent.
New Zealand's economy came to a standstill in the second half of last year, surprising experts in the third quarter with -0.3 percent quarterly growth.
When asked if infrastructure should be a priority above National's tax cuts - which the party promised during the election campaign - Bagrie answered emphatically.
"I would put infrastructure a country mile ahead of tax relief in the upcoming Budget but I suspect that's going to come down to politics," he said. "But if you look at the economics of the situation, there's a pretty clear winner in regard to where New Zealand needs to be putting more money over the next ten years and it's into infrastructure."
The Coalition parties agreed during negotiations last year to progress most of National's tax plan, excluding the foreign buyers' levy. The proposed income tax reductions were set down to come into force on July 1.
The National Party's 'Back Pocket Boost' included changes to income tax thresholds to account for inflation.
Under the proposed plan, the $14,000 threshold would change to $15,600. The $48,000 threshold would change to $53,500 and the $70,000 threshold would change to $78,100.
But Bagrie said there is a range of infrastructure that desperately needs New Zealand's attention, including roading, dilapidated police stations and education buildings amid the historic surge in migration in Aotearoa.
"I think on a per capita basis, population adjusted, we're going to move backwards in 2024," he said.
"New Zealand's economy was so far into the party zone in 2021/2022, 2023 was a little bit of coming down to elements of normality.
"So, was 2023 a real recession? No. I think a lot of firms were actually a lot less busy as opposed to genuinely tough times."
Watch the full video for more.
