This year, numbers. Next year, wellbeing
Budget 2018 will be the last of its kind as Finance Minister eyes a transformation, reports Liam Dann
Grant Robertson’s first Budget will be the last of its kind. It’s an ambitious goal — the new Finance Minister is intent on re-inventing the genre after just one gig.
By 2019, he expects Treasury to have the framework in place for a wellbeing Budget — one which will account for environmental, social and human capitals, as well as the financial numbers.
“Budget 2019 will be different and the style of delivery will be different,” he says. “This one [2018] will look a bit more like the normal ones from recent years.” Robertson means he’ll be reading from a document not dissimilar in structure from last year’s. But we can also expect similarities in the content when he stands in Parliament to deliver it on May 17.
There will be a strong focus on fiscal responsibility: there will be a surplus, there will be a conservative debt target and spending will be limited to 30 per cent of GDP.
There will also be more spending on health and education, but anyone expecting a radical transformation of the economy might be disappointed — this year at least.
Robertson maintains that this is a transformative Government and says he will be talking about the big vision for the New Zealand economy.
But he doesn’t want to rush through the change.
“It will transform the New Zealand economy and society, but we want to bring people with us and show people that it’s a process that they’ve got a stake in,” he says.
“It does come back to the lessons of the 1980s; there was a Government that made radical changes overnight and the impact on the community I lived in was harsh. I don’t want to see that again. I will not oversee an economic approach that does that much damage again — as we transition and transform.”
We’re chatting in the back of a Crown limousine on the way to Auckland Airport after Robertson’s first official pre-Budget speech to business leaders, at a breakfast hosted by Westpac bank.
It’s all the time he can spare for an interview as he heads into the frenzy of a packed Budget month.
Robertson says he’s looking forward to the big day, although he admits it’s not quite the event it was in the days before the Public Finance Act of 1989 required a more orderly release of information.
Before that, Budget day was a time of high excitement, with the prospect of overnight taxes or law changes.
“Some of the midnight drama of a Budget might have disappeared but it still remains a really important marker post for people in terms of what is the plan of a Government,” Robertson says. “I see it in that light — that this is the first stage of a really important plan.
“Our priorities have been clear from day one and that’s that those critical public services need investment, that’s an important part of Budget one.
“What we want to do is lay out a long term plan. The big changes facing our society are intergenerational and require that long term vision.”
Robertson’s pre-Budget speech didn’t include any significant announcements. He was — unsurprisingly, with a business audience — strong on reinforcing his commitment to fiscal responsibility. He made sure to highlight the frugal achievement of finding an additional $700m of cost savings.
Westpac chief economist Dominick Stephens, who was in the crowd, says the speech reinforced a few issues for him.
Stephens says he expects the Government to stay in surplus but the surpluses to be smaller than forecast.
“The most obvious thing was this repeated claim that education, health and the civil service had been neglected and require extra funding,” he says. “No doubt that’s true, you’ve just got to visit a school or hospital these days and I think most people are keen to see them better funded.
“This is what always happens to governments, they find that education and health gobble up more than they were planning.” Stephens believes Labour didn’t allow enough in the pre-election shadow Budget and now “face some nasty surprises”.
The emphasis on the previous Government’s underspending is very normal political spin, he says.
“That’s something I was expecting,” Stephens says. “But the degree of it in that speech reinforced my view and perhaps pushed it further.”
Ironically, one issue that might buy Labour some breathing space is the tightness in the construction sector, Stephens says. That means the Government is simply going to be unable to spend all the money set aside for infrastructure investment in the first year, he says.
Overall, Stephens says he expects this Budget will be built around managing expectations and emphasising fiscal responsibility.
He says it is possible Labour might save a surprise for the day, to grab headlines, but from a political point of view, “this probably isn’t the Budget to do that”.
“I don’t know what he’s going to say in his Budget,” says Employers and Manufacturers Association CEO Kim Campbell. “He’s [Robertson] basically told us what they’re doing and there are no surprises.”
Campbell says he’d give Robertson “high marks” for retaining the emphasis on fiscal responsibility.
But he is sceptical about Government hopes that tax revenue will rise.
“The only hope he has is for business profits to rise,” Campbell says. “Well, business confidence is falling and people’s profit expectations are falling off the back of the policies that actually underpin this Budget.” Campbell says workplace law changes are still a sore spot for business, and concerns about what else the Government might have in store are holding confidence down.
He cites the tax review and uncertainty about immigration changes as two of the biggest uncertainties.
The ANZ Business Outlook survey last week showed confidence dipped again in April.
That’s always a bugbear for Labour, but it is one that this Government has tried to tackle head-on.
Robertson, who has clearly paid close attention to the survey numbers, argues that it’s not all about Government policy. He notes that a big fall in construction sector confidence and weather issues for agriculture played a key part.
But he accepts that this Government has some policies that won’t always be popular with business.
“I’m not naive, the daily cycle of paying people and business planning is very challenging. We’ll always be focused on those issues but I think it would be very bad for a Government to be focused on those issues alone — it’s the job of government to be looking inter-generationally.” In other words, this is a Government that is going to do some things that business might not love because its horizons are set further out than the next quarter’s revenue.
Deloitte chief executive Thomas
Pippos says he doesn’t expect to see massive changes in this Budget.
“It’s not a criticism, it’s just a fact, irrespective of who is in government, most of the policy and most of the expenditure will be exactly the same.” Robertson’s biggest challenge will be satisfying his natural constituency, and the more centrist bulk of the public that he needs to carry with him, Pippos says.
“In some respects he has the luxury of it being his first Budget, so he can be a little bit more vague,” he says. “But when it comes to the second and third Budgets, we’ll be looking for greater detail in terms of the destination as opposed to markers in the journey.”
Robertson says he thinks governments, generally, “haven’t always been good as we should be at outlining what the plan is. If people see progress they’ll buy into it. “People will start to see change, people will start to see improvement,” he says.
“But you don’t make up for nine years of neglect in one Budget. The capacity of some of the sectors wouldn’t allow that even if we had all the money in the world.
“The health sector’s ability to absorb and use the increases is limited and we have to work with that sector to improve that capacity.” Ultimately, it provides a great opportunity to outline both the strategic and operational plan, Robertson says.
He’ll certainly be aiming to make the most of his time in the spotlight.
“It’s a chance to articulate our values and our principles,” he says. “I get to speak uninterrupted for 30 or 40 minutes — that doesn’t happen at home. That’s an unusual thing in politics.
“There’s no Finance Minister in history that will have satisfied everybody on all sides, I just hope people can see our plan, understand that the challenge we are facing is significant, but the plan is there to deal with it.”
HWatch the video at nzherald.co.nz/ business