What the government's $4b surplus means for the election

Analysis - A rosier than expected opening of the government books would have lifted the Finance Minister's spirits after another bad poll that could see Nicola Willis not even return to Parliament.The list MP and deputy leader of the National Party will be spending the next five weeks screaming from the rafters about the work she has done to increase the forecast surplus and hold the line in such economically fragile times.The party's whole mantra is that it's better at the economy than the alternative government and Tuesday's pre-election fiscal update (Prefu) gave it some hard evidence to use in that fight.The surplus, which is forecast to land a year earlier than expected, will likely reach $4 billion - up from the $2.5b laid out in May's Budget.That's thanks to the economy picking up enough to have businesses invest and grow more - and "higher and more persistent inflation" - ultimately gifting Treasury's accounts more tax revenue than expected.The irony being the surplus looks better because working Kiwis are paying more tax to grow the pie.The improved forecasts meant the government intended to borrow $15b less over the next four years.But while Willis was positively beaming as she entered Treasury to deliver the news on Tuesday, it also followed fast with a warning.This was not the time to spend up big or "give a green light to open the cheque book" with an election on the horizon.Being fiscally responsible and careful with every dollar of taxpayers' money is the reputation Willis has been trying to build for herself her entire time in office.It's led to tiny operating allowances, some sizeable cuts that have brought with them a lot of protest and at times hurt, and an insistence from Willis that it was all for the greater good.That promise of future greatness is what Willis will be hoping people read Tuesday's Prefu as delivering.With both National and Labour wallowing on 28 percentage points in Monday night's 1News Verian poll it suggests voters might be looking elsewhere for hope and optimism.The cost of living crisis rolls on with fuel prices back up at almost the same dizzying heights they were at the peak of the Middle East crisis and no end in sight.Even Treasury Secretary Iain Rennie used a large chunk of his address at Prefu to warn the continued unknown factors in the conflict and global volatility made medium- to long-term forecasts very difficult to gauge.Treasury Secretary Iain Rennie.RNZ / Samuel RillstoneIn one respect Willis put the cost of living ahead of all else when she waved goodbye to reaching surplus a year earlier - next year - to prioritise a continued freeze on the fuel excise tax in January.Labour has gone further, promising to freeze it for the next three years, but having not released their fiscal plan yet it's unclear what that might cost and how taxpayers could end up footing the bill on it down the track.National and Labour are expected to deliver fiscal plans that align with Prefu and run the risk of being subjected to a narrative of "fiscal holes" if there's even a hint the numbers don't add up.Some of the minor parties have spent election after election getting away with making grand promises with half-baked costings - the logic being it's National and Labour that lead the negotiations and it's on those parties to ultimately make the maths add up.But that model may be coming to an end with the 1News-Verian poll giving ACT and New Zealand First 20 percentage points to National's 28.There's so little in it, it's hard to know who would be leading what in any post-election chats.The Green Party is already eyeing up the baubles of office with co-leader Chloe Swarbrick suggesting in any negotiations with Labour it would need to take seriously the idea of giving portfolios like finance, climate change, and energy to the lefter-leaning party.Labour leader Chris Hipkins rubbished the idea saying Barbara Edmonds would be finance minister in any government he led, and slapped Swarbrick down for getting ahead of herself when the campaign has only just started and voting hasn't even opened.Opportunity on Tuesday was busy laying out bottom lines for any talks - this from a party that hasn't even made it into Parliament at this point.So while National and Labour argue over the books and whether they would have been in a better state if a centre-left government had been in charge these past three years, at least some of the parties they'll end up doing deals with have moved on to measuring the curtains in ministerial offices.