Cloudy, with a chance of jobs
Today is the rainy day. The forecast might only be for cloud in Wellington, but for Finance Minister Grant Robertson this is that dark day he has been forecasting for years: a day when tight spending rules are thrown to the wind and a lot of borrowed cash is spent to get New Zealand out of a crisis.
What Robertson emerges with at 2pm today will not be the Budget he was tinkering with in January. It will not be the usual election-year Budget, flush with voter-friendly spending initiatives for middle New Zealand. It will be a Budget focused on the economic recovery from Covid-19 – specifically, jobs.
Prime Minister Jacinda Ardern was keen to get the phrase ‘‘Jobs Budget’’ into as many heads as possible in her pre-Budget speech yesterday, using the word ‘‘jobs’’ no fewer than 11 times.
This was with good reason. A desire for jobs crosses the political divide. A Horizon poll of 1150 Kiwis conducted over April 28-30 found 79 per cent support for Budget policies focused on ‘‘getting people back to work’’ – far higher than the support for helicopter cash payments (50 per cent) or large infrastructure projects (40 per cent).
This isn’t hypothetical for these voters: according to that same
survey, almost a million Kiwis have had their income hit by Covid-19.
Treasury will reveal alongside the Budget how bad it thinks the picture is. The Reserve Bank’s projections, released yesterday, are not rosy: the baseline forecast sees the economy shrink by 8.4 per cent in the year ended March 2021, with unemployment peaking at 9 per cent.
The big question Robertson will need to resolve today is what to do with the workers the Government is currently supporting with its wage subsidy, which has already spent more than twice the sum earmarked for unemployment benefits across the whole year before this crisis.
The wage subsidy will begin to run out in June, meaning businesses will be making decisions soon on whether to keep on the 1.7m Kiwis currently being supported by it.
Many of these businesses will be out of the woods with the full lifting of the lockdown today. But many will not: tourists aren’t coming back soon; nor is the kind of consumer confidence enjoyed pre-crisis.
As much as the Government would like you to go out and buy lots of goods and services with your salary, plenty of people would rather save it right now, even with anaemic interest rates, as they anticipate lean times.
It is not just employment that the
Government must support, however. Plenty of people will be unemployed, and calls to properly enact the recommendations of the Government’s own welfare expert advisory group have never been louder. This would not be as reckless as some would have you think. Poor people tend to spend the money you give them, stimulating the economy as they do it.
The mood music the Government has played in the leadup to this Budget has been careful. Pre-Budget announcements have taken care of some smaller issues (Winston Peters’ need to help the racing industry) and larger ones, like pay equity for early childhood teachers and a giant dollop of cash for the health system.
Ardern has alternated between telling the public that this Government is still prudent and they won’t get everything they ever wanted in this Budget and making clear she has no desire for actual austerity, with cuts to public services to pay for everything else.
She has also put the weather metaphor to good use. New Zealand was heading into a tough winter, she said yesterday – but every winter is followed by a spring. How we pick ourselves out of this mess will be decided both today and when that spring comes. Because this spring there is an election.