Barbara Edmonds on focusing Reserve Bank on jobs, the landlord tax cut, pay equity plans, the big thing Labour got wrong and whether she’s getting ‘nasty’

“She’s already at that level,” Edmonds said.

The Herald sat down with Edmonds for a 40-minute interview to test where she is at on the big questions hanging over Labour as it heads into this year’s election.

Edmonds had plenty to say, but the big decisions on how Labour will pay to reinstate the old pay equity regime, whether it will bring back a ban on interest deductions and how it plans to pay for greater public service hiring remain unanswered.

National’s big attack on Labour is that the party is, in the words of Willis, “bereft of ideas”, having announced very little policy and put off most fiscal announcements until after the Budget.

Edmonds articulated a vision for what’s wrong with New Zealand and what she’d like to do better, but stuck to the party line of giving almost nothing away about how Labour actually plans to achieve this vision, let alone how it plans to pay for it beyond the small capital gains tax announced last year.

“We’ll make our decisions and announce them,” Edmonds said, responding to a question about new taxes like reinstating the ban on deducting interest costs for landlords.

“Not today mate,” Edmonds said, with a chuckle.

That said, Edmonds dropped a few breadcrumbs hinting at where Labour might go when the party finally decides to break cover and announce some policy later this year.

Edmonds strongly hinted Labour would bring back a Grant Robertson-era policy of giving the Reserve Bank a dual mandate to target maximum sustainable employment as well as keeping inflation low and stable.

“I am seriously considering about whether we should bring that back,” Edmonds said.

Although common overseas, New Zealand’s central bank only had a dual mandate between 2018 and 2023, when the incoming coalition Government returned to a single mandate, focused on reducing inflation.

“It was there for a reason,” Edmonds said.

She said the “impact on people and employment” meant “there were very strong reasons to bring it back”.

February’s Monetary Policy Statement revised the timetable for a hike to the Official Cash Rate, suggesting a hike is likely to come sooner than forecast in the last set of forecasts, published in November 2025.

With unemployment still relatively high, Edmonds said it was “absolutely arguable” the bank would have held rates lower for longer if it still had a dual mandate, rather than just a singular focus on inflation, which is what the forecast rate hikes are intended to address.

“[If] it’s a dual mandate, that does make your thinking different if you’re on the Monetary Policy Committee,” she said.

Having announced its capital gains tax policy, the big remaining tax question for Labour is what to do with interest deductions for residential landlords, which were reinstated by the coalition Government, having been banned under Labour.

Labour slated the Government’s decision to restore the deductions as a tax cut for landlords.

Labour has already changed its interest deductibility policy since the last time it was in office. Back then, someone could deduct their interest costs from any tax liability incurred by the bright-line test, a form of capital gains tax.

Its current capital gains tax policy would prohibit these deductions, which has the effect of making any capital gains tax bill larger than it might otherwise be. Investors could deduct the cost of capital improvements, but not interest costs, under Labour’s current policy.

There is a question mark over whether Labour will bring back the ban on deducting interest costs from landlords’ annual income tax filings, as was the case under the last Labour Government.

Banning interest deductions is a lucrative source of revenue for the Crown. The previous regime, since repealed, was forecast to net more income once fully phased in than Labour expects to get from its capital gains tax, although revenue estimates jump around a lot.

“We’ll make our decisions and announce them,” Edmonds said, when asked about the scheme.

“That is something that we’ll set out as part of our fiscal plan,” she said. A fiscal plan is a kind of alternative budget that parties often produce prior to the election.

Banning interest deductions at both points would go further than Labour has ever gone before.

Last week, Labour leader Chris Hipkins hinted at a halfway-house approach in his interview with Ryan Bridge TODAY on Herald NOW.

“I’ve been listening to feedback from landlords about this, and removing 100% of interest deductibility was, I think, something that we’re unlikely to do in that same way again,” Hipkins said.

He would not say whether he was considering reducing the amount of deductible interest to 50%.

This, interestingly enough, is where David Parker, the Minister of Revenue who introduced the first ban, ended up.

Prior to leaving Parliament, he told the Herald he thought the 100% ban went “a bit far” and reckoned a 50% level would have been better.

National is also putting pressure on Labour to explain what it would do if house prices fail to pick up, resulting in lower CGT revenue.

Edmonds said the CGT modelled “conservative” house price growth of 3% a year. Treasury and ANZ, New Zealand’s largest trading bank, forecast about 2% growth this year, meaning that if the CGT were implemented this year, Labour would raise less money than expected.

Fortunately for Labour, Treasury expects quite significant gains in coming years of between 6.6%-7%, meaning Labour would, on those numbers, raise more money than it hopes.

One of the main contributors to last September’s 1% quarterly inflation increase was local authority rates and payments, which were up 8.8%.

The Government seized on the print as evidence for its policy to cap annual rate hikes to between 2-4%.

Edmonds didn’t say whether she’ll keep it. Her main concern is the rates cap will simply lead to more user charges for council services.

“Councils are constantly saying to us ... well, how are we going to be able to afford these services? And if we can’t provide the services and they move to more user-pays services and for example, you have to pay to go to your local library – that ultimately still falls on the ratepayer.”

Edmonds said there was a question about “what services will councils cut as a result of [the rates cap], and who will pay for that”.

Asked whether there were some services councils should think about cutting in light of strained household budgets, she said: “Well, they need to talk to their community.”

Edmonds is equally circumspect in her views about Large Scale Asset Purchases (LSAP), the name given to the digital money-printing that did a lot of the legwork of the Reserve Bank’s response to Covid-19. The printed money was used to buy government debt.

The LSAP is at the centre of the review Willis has commissioned into the Reserve Bank’s Covid response, which is due to report back in September, just before the election – “cynical and desperate” timing, according to Edmonds.

During the pandemic, Robertson signed several indemnities with the bank, putting the taxpayer on the hook for losses generated by the LSAP. Those taxpayer losses worked out to be about $11 billion, although in the bank’s view, the money saved by the taxpayer thanks to the LSAP igniting the economy during Covid made the programme worthwhile.

“I’m not going to trample on the mana of people who had to make the decision at a time when advice was saying that we’re going to have unemployment the size of Palmerston North,” Edmonds said.

But she would not definitively answer whether she thought the LSAP scheme had been any good. She did, however, seem to question whether the quantum of money-printing, which ran in excess of $50b, was too high.

“I think it was a tool that they needed for the time. The extent of how much [money] it is, that’s a question that’s always debatable,” she said.

If asked to indemnify a future round of LSAP, Edmonds said she would get as much advice as possible, including advice from outside the Reserve Bank. At the time of the LSAP, Robertson received advice from Treasury and the Reserve Bank.

The biggest fiscal question hanging over Labour is what to do with its pledge to restore the old pay equity regime, the cost of which was estimated by Treasury to be $12.8b more, over four years, than the new regime.

On its own, restoring the old regime would be one of the largest single operating commitments made by any major political party in any election, coming in just slightly below the additional funding Labour and National promised the health system in 2023.

The price tag is more than four-and-a-half times higher than the revenue Labour estimated it would earn from its capital gains tax and, at $3.2b annually, restoring the old regime comes in at just slightly less than the $3.5b budget for defence in 2026.

“It’s a really big bill,” Edmonds admitted.

“But everything is a big bill, right – you have to make choices,” she said.

Asked whether she accepts that only a politically unpalatable tax increase would be able to cover the bill, Edmonds offered only this: “We’ve set out our tax plan.”

In lieu of any additional taxes (Labour has hinted at restoring a digital services tax), revenue from its capital gains tax is well short of what’s required to pay for pay equity and, more challenging still, most of the revenue from that tax has already been spent, leaving Labour with little additional revenue to foot the enormous bill.

Asked whether she accepted the roughly $3b annual figure, Edmonds said she had asked Treasury and Wills to “break down” where it came from and had “never had a clear answer”.

Edmonds said Labour would ultimately set out what it would “prioritise” to pay for the policy.

“I’m aware of the expenses, but I’m also aware that where governments fail is they only look at the expense part of the ledger, they don’t look at what the productivity gains are from it. They don’t look at what it means around how people stay in work and having a more productive economy,” Edmonds said.

Asked where observers should look to find an answer to the pay equity question, Edmonds responded, “we’ve set out our tax plan”, suggesting further major tax announcements were unlikely.

So would the money be found from cutting spending? Edmonds responded that she will have spending prioritisation decisions to make, “just like every finance spokesperson before me”.

One obvious area to free up a bit of money is the Government’s Investment Boost tax incentive, which is estimated to cost $6.6b over four years – about half the sum Labour needs to find to fully reverse the pay equity changes, based on Treasury’s 2025 costings.

The only problem with filleting Investment Boost is that Treasury is a fan, estimating it will grow wages by 1.5% and GDP by 1% more over 20 years, with half of those impacts occurring in the next five years – although those figures don’t look all that impressive, it takes quite a lot for the usually conservative Treasury to adjust its forecasts based on a single policy.

Edmonds said Labour would take an “evidence-based approach” when it comes to deciding whether to retain the policy. CAANZ, the country’s accounting peak body, backed Willis’ concerns that the lack of certainty from Labour on whether it would retain the policy was holding back some investment.

The trouble with this, for both Labour thinking of scrapping the policy and National arguing it should be retained, is that not all firms will have filed final tax returns for the first year of Investment Boost by the time polls close at the election.

That means any decision about the future of the scheme will be made without complete information, although Edmonds said that some businesses will file returns early, giving IRD a view, however imperfect, of the efficacy of the scheme.

Edmonds voiced concerns about the broad scope of the policy, which could theoretically be used to bring forward depreciation on assets like oil rigs, which she said would be “against our values”.

The scheme as it stands is very untargeted, with only a handful of exclusions, like property investment. Trimming eligibility by excluding things like vehicle purchases and yes, oil rigs, has been floated as a way of saving some money from the scheme, although Edmonds did not suggest the ways she would change it.

Edmonds also wants to know whether Investment Boost is leading to more investment in the economy or just encouraging firms to bring forward investment they may have otherwise made, a criticism made by Dr Paul Dalziel of the Wellbeing Economy Alliance.

“How much of it is actually a spending choice that you’ve moved forward that you would have actually probably still spent anyway?” Edmonds queried out loud.

Would Edmonds consider axing the policy completely?

“No decisions have been made on that because I’m still waiting for the evidence from the Minister of Finance that it’s an effective policy,” she said.

Edmonds said she would continue to publish the ObegalX measure of the operating balance, which excludes ACC.

ObegalX was introduced by Willis as a new main measure and tends to make the deficit look smaller by excluding ACC.

Last year, Edmonds said she would stick to the traditional Obegal metric and target a surplus by the end of the forecast period in 2030.

She now concedes this is unlikely and that the surplus would only be achieved under the Obegalx measure on that timeframe. Willis is on track for a surplus by that measure in 2030, but her fiscal goals are targeting an earlier surplus.

“Probably not Obegal,” Edmonds said, when asked whether she could get to surplus.

“Well look at ObegalX under minister Willis, it’s slim. We’ll have a better idea when [the] Budget happens,” she said.

“Every Finance Minister and every finance spokesperson wants to get into surplus in the forecast period.”

From July 2018 to July 2024, the last year funded by a Labour Budget, the core public service grew from 51,000 employees (fulltime-equivalent) to 65,000. The wider public sector grew from 401,000 to 481,000.

Both figures have fallen in the year to June 2025, the first period fully covered by a coalition Government Budget, with public service numbers down nearly 4000 and public sector numbers down by about 1000 over the year.

Edmonds would not give any indication of what level of public sector employment growth is appropriate and how many public servants Labour could afford to hire back.

She was critical of the cuts, however.

“Why are we not hiring our New Zealand [graduate] nurses now?”

“In my community, in Porirua, we have a nursing programme that pumps out the most Māori and Pacific nurses [who are] basically saying to me ... I graduated a year ago, I can’t get a job.

“A lot of it is around what are the public services that the public expect from a government, right?”

But what happens if Treasury says the Government can’t afford to hire that many nurses?

Treasury’s advice to the current Government, and to Labour before it, has been that the current health budget is appropriate, even if it leads to a tough employment environment for graduates.

Edmonds said she’ll be “guided by what public services that New Zealanders need and rely on”.

But what if there’s a mismatch between the public services that New Zealanders need and the money the Government has to pay for them?

While Robertson blocked more Budget bids than he approved, the last Labour Government tended to increase its self-imposed spending limits when confronted with high public service demand or escalating costs. All of Robertson’s Budgets lifted spending above what was promised at the election. In Labour’s second term, this resulted in higher borrowings.

So what would Edmonds do when ministers ask for more money, while Treasury advises her to spend less?

“I’m very good at saying ‘no’ – I’ve got eight kids,” she said.

As Labour gets ready to ask voters to do something they’ve never done before, return it to power after just one term in the wilderness (Labour’s stints between governments have been three or more terms), the Herald asked Edmonds what she thinks the last Labour Government got wrong.

After some time, she lands upon the Three Waters reforms, specifically the inclusion of a co-governance component which would have made the new water entities responsible to councils and Māori.

“We believed that was the right decision.

“But it was quite clear when we got kicked out that there was a very big part of New Zealand that didn’t think it was the right decision.”

“The major thing for me is you need to bring people along with you as part of that development,” she said.

Edmonds said that while Porirua, her local council, was supportive of the reforms, that did not mean that “every single council was ready for it [co-governance] and every community”.

“Then what it led to was a very racist campaign,” she said.