A tale of two coun­tries

Kapi-Mana News - - OPINION -

It is Budget week in Aus­tralia and New Zealand, and the cen­tre-right gov­ern­ments in both coun­tries have a re­mark­ably sim­i­lar story to tell.

Es­sen­tially, Tony Ab­bott and John Key will be en­gaged in brag­ging to the pub­lic about their achieve­ments in bal­anc­ing the books. That’s un­der­stand­able. A bal­anced Budget is rou­tinely treated as a sign of a govern­ment’s man­age­rial com­pe­tence. In ad­di­tion, it sends a use­ful mes­sage that any per­sonal hard­ships that vot­ers may have ex­pe­ri­enced have been for the coun­try’s greater good.

By con­trast, po­lit­i­cal op­po­nents tend to paint mod­ern Budget sur­pluses as the prod­uct of un­nec­es­sary, harm­ful spend­ing cuts that have been se­lec­tively im­posed — while also claim­ing that the bal­ance sheet re­sult is merely smoke and mir­rors, and not to be taken as a sign of gen­uine, long term health in the econ­omy.

This crossfire of po­lit­i­cal claims and counter- claims over the Budget sur­plus can be deaf­en­ing, and some­what puz­zling. Re­port­edly, Aus­trala­sia sur­vived the global fi­nan­cial cri­sis in bet­ter shape than al­most any other re­gion on the planet. New Zealand’s govern­ment debt was just 35.9 per cent of GDP in 2013 – in Aus­tralia it was only 28.8 per cent – which puts us among the least in­debted gov­ern­ments of the world’s ad­vanced economies, and cer­tainly in bet­ter shape than the 105 per cent fig­ure for the USA and the 243 per cent for Ja­pan.

Why, there­fore, has there been there such a con­certed drive for aus­ter­ity ?

In Aus­tralia in par­tic­u­lar, as Bloomberg’s busi­ness colum­nist Wil­liam Pesek has claimed, the Ab­bott govern­ment has con­cocted a fake bud­getary cri­sis, ‘‘in or­der to at­tack pro­grammes that it dis­likes on par­ti­san grounds, in­clud­ing un­em­ploy­ment ben­e­fits, as­sis­tance for poor and sin­gle moth­ers, and health­care pro­grams for the el­derly and dis­abled.’’

Not only are such ac­tions mean and un­nec­es­sary, Pesek told his busi­ness read­ers, but the em­pha­sis on aus­ter­ity and on shrink­ing the role of govern­ment is likely ‘‘to starve Aus­tralia of the vi­tal in­vest­ments in ed­u­ca­tion, train­ing and in­fra­struc­ture the coun­try needs if it is to di­ver­sify its econ­omy and thrive in the decades ahead’’.

Such con­cerns strike a chord here, as well. Re­gard­less of the po­lit­i­cal games­man­ship in­volved, a bal­anced Budget is (ar­guably) only a tool, and not an end in it­self. Cut­ting spend­ing and jug­gling the fig­ures to cre­ate a sur­plus will nei­ther make New Zealand pros­per­ous, nor glob­ally com­pet­i­tive.

To cul­ti­vate long term pros­per­ity, any New Zealand Govern­ment will need to un­der­take ju­di­cious spend­ing on tech­nol­ogy and skills train­ing to boost in­no­va­tion and pro­duc­tiv­ity. It will also need to fund new trans­port in­fra­struc­ture in Auck­land and else­where, and bet­ter in­ter­net con­nec­tiv­ity. It will re­quire govern­ment to recog­nise and re­solve the causes of in­come in­equal­ity and wealth con­cen­tra­tion, and the so­cial prob­lems fos­tered by them. It will also re­quire New Zealand to pur­sue poli­cies to com­bat cli­mate change, given the re­lated droughts that ap­pear likely to hit our farm­ing sec­tor more fre­quently.

The Key Govern­ment is ad­dress­ing some of these con­cerns. Yet the ex­is­tence of this week’s sur­plus and how it has been achieved are prob­a­bly the least im­por­tant as­pects of the Budget.

In­evitably, the Budget sur­plus will be treated as a fetish ob­ject and as a po­lit­i­cal totem.

A more sig­nif­i­cant de­bate re­mains to be had in elec­tion year about the plan­ning – and if need be, the debt fi­nanc­ing – for long term growth.


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