Please sir, we want some more

Kapi-Mana News - - CONVERSATIONS - GOR­DON CAMP­BELL TALK­ING POL­I­TICS

In the past, the na­tion would crouch around the ra­dio on Bud­get Day with the same rev­er­ence af­forded to the an­nounce­ment of All Black teams. Since then, a slew of fore­cast re­vi­sions and half yearly updates have eroded the Bud­get’s sig­nif­i­cance, yet the self-in­ter­est in­volved hasn’t changed much. Peo­ple used to tune in to learn what a beer and a packet of smokes would cost them. Nowa­days, peo­ple want to know the size of their tax cuts.

Pri­mar­ily, the Bud­get serves as a mar­ket­ing op­por­tu­nity for the gov­ern­ment of the day. Clearly, the in­tended take­away mes­sage from last week’s rev­e­la­tions was that the public was fi­nally be­ing re­warded for its years of belt tight­en­ing, from bud­get sur­pluses cre­ated by the gov­ern­ment’s pru­dent eco­nomic man­age­ment. To en­able in­di­vid­ual min­is­ters to max­imise their own splashes of pub­lic­ity, the public had al­ready been dripfed the Gov­ern­ment’s plans to spend $11 bil­lion over the next four years on phys­i­cal and so­cial in­fra­struc­ture, to boost tourism by $178 mil­lion, to spend $2.3 bil­lion on hous­ing, etc.

Yet to the sur­prise of the spin mer­chants, the re­sponse has been mixed. Given the $7.2 bil­lion size of the pro­jected sur­pluses, some sec­tors have been left feel­ing some­what dis­ap­pointed. Busi­ness groups, for in­stance, have crit­i­cised the lack of cuts in cor­po­rate tax rates, and for high in­come earn­ers. To heighten their ap­par­ent size and im­pact, Bud­get al­lo­ca­tions are now rou­tinely ex­pressed in four yearly amounts. On closer in­spec­tion, how­ever, some of this Bud­get’s spend­ing in­creases have been deemed to be more like soup kitchen ra­tions than a four-year ban­quet.

As crit­ics have not been slow to point out, the amounts al­lo­cated to Votes Ed­u­ca­tion and Health in gen­eral (and to men­tal health ser­vices in par­tic­u­lar) mean that these sec­tors may well strug­gle to main­tain their cur­rent lev­els of ser­vice delivery - once the im­pact of in­fla­tion, ris­ing costs and the needs of an age­ing pop­u­la­tion have been fac­tored in. Like Oliver, key parts of the econ­omy were left want­ing con­sid­er­ably more.

Where tax re­lief was de­liv­ered, it wasn’t in the usual fash­ion. In­stead of rate cuts, a trio of changes were made to tax thresh­olds, Work­ing For Fam­i­lies tax cred­its and ac­com­mo­da­tion sup­ple­ments. Al­though this was pack­aged as a $2 bil­lion re­sponse to the needs of the poor, the rip­ple ef­fects through the tiers of in­come mean that higher in­come earn­ers will still reap the big­gest re­wards. A risk re­mains that the ac­com­mo­da­tion supplement changes – which in­clude a $20 boost to stu­dent al­lowances – will be taken by land­lords as a green light to raise rents.

Still, few other coun­tries can point to sur­pluses stretch­ing to the hori­zon, low gov­ern­ment debt and low un­em­ploy­ment. Trea­sury’s fore­casts of con­tin­ued strong growth may be op­ti­mistic, given that in con­struc­tion and else­where, the econ­omy is al­ready bump­ing up against ca­pac­ity con­straints.

In an elec­tion year, the vot­ing public could still take some con­vinc­ing that this Bud­get’s pro­vi­sions are the best it can rea­son­ably ex­pect.

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