Election-year cake with cherry on top

New Zealanders expected some sweeteners in their election-year cake when Finance Minister Steven Joyce rose to deliver his maiden Budget in Parliament yesterday. What we got was a cream filling, frosted icing and a cherry on top –a $2 billion family incomes package which will mean more money in the kitty for more than a million households.

The package is many-pronged, reducing income tax thresholds for the lower paid, changing Working for Families tax credits for people with children, and boosting the accommodation supplement.

For some families, the last of these will be the most significant, and the luckiest people – those in areas reclassified as high-cost housing areas – will benefit by about $145 a week from the Government’s largesse.

For some, the pickings are meagre. Labour leader Andrew Little seized on the example of a single person earning $33,000 a year who would gain $11 a week from tax cuts but lose $10 from the Independent Earner Tax Credit, which has been scrapped. Brandishing a dollar coin to show to show what was left, he labelled this a ‘‘dollar-bill Budget’’ and cynical electioneering.

But his example was an outlier. While some people will get less from Working for Families as that scheme is adjusted, the truth is that Joyce is feeling generous in the confidence that New Zealand will continue to enjoy strong economic growth. The average family can expect to get $26 more each week.

Although the hand-outs are not as large as those in the 2008 and 2010 Budgets, they may prove to be a bold election-year strategy for National. This Budget will make a big difference to people in Labour territory – the Struggle Street families, and the lower income earners worried about their housing costs.

The changes come into effect on April 1 next year. This means potential voters have to visualise them happening under a future National government. Joyce seems to be saying, ‘‘Vote for us and this is what we’ll give you’’. As Little pointed out, Joyce is both Finance Minister and National’s election campaign manager.

Little moved the traditional vote of no-confidence, but it seemed clear from his speech to the House that Joyce had left him little room to manoeuvre. By the end of the speech, Little was reduced to reading Labour Party policy from an iPad.

Yet there were missed opportunities. Changes to the accommodation supplement help people afford the home they are in, but won’t build more houses.

Joyce’s plan also imagines economic growth averaging over 3.1 per cent over the next five years, peaking at 3.8 per cent in 2019. Based on recent history, that is optimistic, and it depends partly on expected population growth that will bring other pressures, for example in housing, health and education.

Perhaps the more significant longer-term measures are those aimed at future-proofing the economy, especially those to reduce the level of Crown debt and replenish the National Disaster Fund.

Joyce’s Budget is built on the promise of a strong performing future economy, but these measures will provide future governments with wriggle room when the next natural disaster or global financial crisis hits.