Budget bets big on recovery

For months the Government has pledged to use its balance sheet to buffer New Zealanders from the economic ravages of Covid-19. Finance Minister Grant Robertson yesterday attached a price tag to that promise: $50 billion will be spent over four years fortifying and rebuilding the economy, with big money earmarked to keep people in jobs.

Of the $50b war chest, $15.9b has been allocated in the Budget, including an eight-week targeted extension to the wage subsidy at a cost of $3.2b.

Back in 1991, National’s Finance Minister Ruth Richardson declared her economic plan to be ‘‘the mother of all Budgets’’. It heralded cuts to welfare and introduced the term user-pays to the Kiwi vernacular. In contrast, Robertson’s response to the current crisis is to spend big – about five times what governments normally dish out on new spending.

The Government’s first economic response to the coronavirus crisis cost $13.9b. Robertson’s plan to navigate Covid-19 will require lots of borrowing and will see the Government’s net debt balloon to over half the size of GDP in 2023 and 2024.

National’s leader Simon Bridges says he’s worried by the Government’s ‘‘huge spending’’ and the legacy of debt. ‘‘It means $80,000 a household that needs to be paid off, it will mean more taxes for people . . . Either you pay that back with additional taxes, or you set up a legacy for our children.’’

Very little about the past few months can be regarded as normal, but there is a familiar feel to yesterday’s post-Budget argy-bargy. For seven weeks we’ve been referred to as New Zealand’s Team of Five Million, but we are in an election year and the thinking of our country’s leaders demands critical scrutiny.

The Government’s willingness to ramp up debt shouldn’t surprise anyone, especially as Prime Minister Jacinda Ardern this week described cuts to essential services during times of need as ‘‘immoral’’. She signalled the Budget would be about supporting people to stay in their jobs, but also help them move to new ones if needed. In this vein, Robertson delivered a $1.6b funding injection for trades and apprenticeship training.

A test of the Budget – and the Government’s leadership credentials – is how it balances the country’s immediate needs with long-term challenges. Supporting Kiwis to retrain and move out of industries stymied by Covid-19 will prove crucial in sectors such hospitality and aviation. Another measure of the effectiveness of this year’s Budget is how it plans to wrap the state’s ‘‘blanket of support’’ around the most vulnerable.

No doubt the thousands on the waiting list for public housing will celebrate the pledge to build 8000 new homes – a doubling of its state house building efforts. If the Covid-19 crisis leads to more New Zealanders living in warm, dry homes, then that’s something to celebrate.

Also of note is a $79m boost to social service providers and $46m for community groups.

Not for the first time, Ardern this week echoed the sentiments of Labour Prime Minister Norman Kirk when she said ‘‘all anyone ever really needs is something to do, somewhere to live, someone to love and something to hope for’’.

The Government has laid out its plan for getting the economy back on its feet, coupled with an assurance the country will get through the tough months ahead.

Whether it’s done enough to reassure the public will not be fully known until September’s general election.

A test of the Budget ... is how it balances the country’s immediate needs with long-term challenges.