Five elements of a good first Budget
Fran O’Sullivan sets out her expectations for Steven Joyce’s inaugural proposals
First — for God’s sake, be bold
After nine years in office, Steven Joyce’s first Budget needs to be a cracker.
Finance Ministers are judged by their annual Budgets. If the Nationalled Government simply stands on its laurels in an election year, it is inviting voters to turn to Labour and the Greens and trial their new ideas.
A bold Budget would unveil a significant long-term investment in the country’s infrastructure. For example, a high-speed railway network to service Auckland from elsewhere in the Golden Triangle (Hamilton, Whangarei, Tauranga).
Another example: public private partnerships to build “satellite cities” outside of Auckland to house the huge jump in migrants to the Super City.
But media leaks suggest Steven Joyce’s debut Budget will essentially be a “catch-up affair”. There will be shifts to the income tax thresholds so that lower and middle-income earners have more cash in their pay packets. Changes to Working for Families and maybe an increase in the accommodation supplement, which is necessary because of rising rental rates in our major cities.
This doesn’t really cut it.
Second: Post a surplus?
Joyce will rate well here.
But Bill English had already set the Government on the fiscal track to posting government surpluses. This was no easy feat in the wake of the Global Financial Crisis when the Government’s books blew out. But the GFC was nearly a decade ago.
From a distance (in Switzerland travelling with the NZ Initiative to look at how New Zealand can once again become a “rich country”) it is easy to overlook that for some nations — like the Swiss — posting surpluses is mandatory.
Joyce should also normalise Budget surpluses instead of treating them as significant political and economic feats.
But there is a growing body of business opinion that says spending much of that surplus on investment in major infrastructure to support growth is where Joyce should focus. Not simply paying down debt.
Third: Budget is the plan
Joyce’s Budget should answer one key question: Does the Government have a plan? New Zealand is at a choke point. There needs to be a credible five-year plan to capitalise on the major influx of immigrants. Ensure New Zealanders can be housed; clean up our waterways . . . the list goes on.
Joyce has had a lengthy eight-year period as English’s understudy.
That’s more than enough time to come up with a plan.
Fourth: Get economic growth up on a per capita income level
From a “Decade of Deficits” to a “Decade of Growth” — is good political spin and a story which Joyce is retailing at every opportunity. National inherited an awful situation when it became Government in 2008. It announced a “rolling maul” of infrastructure projects to stimulate the economy.
A big jump in net immigration has kept economic growth moving as a percentage of GDP. But this is not occurring at the per capita income level which is so important when it comes to transforming New Zealand.
Fifth: Strip out the smoke and mirrors
Joyce — like previous Finance Ministers — will be a fail on this score. He is unlikely to strip out the “smoke and mirrors” which politicians use to overstate government expenditure; particularly on social programmes such as housing.
He’s already been caught out by Labour’s Grant Robertson when it comes to massaging the numbers on an $11 billion investment in infrastructure.
Robertson labelled the $11b figure as “just playing with numbers”.
“When you peel it all back, what you have is National only promising to spend an extra $300 million a year from the promise made in the halfyear Budget update.”
Finance Ministers really shouldn’t play this game and Treasury should issue tables which keep a running track of “re-announcements” of spending promises. Unfortunately, government departments know which side their bread is buttered
on. So, media will have to unpack the numbers instead.