Labour’s first Budget will set the tone
Jacinda Ardern probably raised a few eyebrows when she promised to tackle the elephant in the room at a business forum on Wednesday.
The biggest elephant in the room at Ardern’s recent public events has been some increasingly far-fetched scuttlebutt about her partner Clarke Gayford.
Ardern was in fact referring to lagging business confidence, which has not yet recovered from the shock of National’s ousting.
A rapid plunge in business confidence would be far more damaging to economic and wider confidence than gossip.
But it seems there isn’t anyone in the country who has not had the Gayford rumours retailed to them either over the dinner table or via social media.
Those rumours had been thoroughly and unequivocally laid to rest the day before the prime minister took to the stage for what was billed as a major economic speech.
The rumours were so pervasive the police commissioner took the unusual step of issuing a statement rejecting any suggestion of Gayford being under investigation.
Leaving aside the conspiracy theories about how or why the police reached their decision to make a statement – and there are almost as many as there are theories about the original gossip – it will be a relief to the 9th floor to clear the decks of what must have been a huge distraction over recent weeks.
If the story had come out another couple of weeks later it could have derailed months of careful planning around this Government’s first Budget.
That would have weighed heavily on Ardern’s kitchen cabinet.
After what seems like a messy few months for the Government, the Budget is an opportunity to hit the reset button.
But there is much more than that resting on Finance Minister Grant Robertson getting it right.
Their first Budget will define the tracy.watkins@stuff.co.nz Ardern-Robertson era.
John Key and Bill English’s first Budget under the shadow of the global financial crisis set the tone for the rest of their nine years in government.
They surprised on the upside by softening the blow of the GFC, rather than using it as an excuse to slash and burn.
English went against some of National’s ideologues and offset cuts in some areas by borrowing billions to protect jobs and the most vulnerable, and cemented his legacy as the finance minister who steered New Zealand through a global economic crisis.
In 2000, Michael Cullen and Helen Clark’s first Budget confirmed the change in direction under the Labour/ Alliance government which reformed employment law, substantially lifted social investment, renationalised ACC, hiked the tax rate on income over $60,000, announced a new Superannuation Fund and established Kiwibank.
Some of the current slump in business confidence has echoes of the winter of discontent that hit Clark and Cullen’s first Budget.
Business is traditionally wary of Labour governments.
But some of it is also down to uncertainty about the extent to which this Government means change.
Ardern’s speech on Wednesday spelt out her Government’s priorities as ‘‘enabling a strong economy, being fiscally responsible and providing certainty’’. Business will want to see the detail, rather than rhetoric, however.
Ardern also signalled her willingness to work more collaboratively with business, by announcing a ‘‘future of work’’ commission, bringing together business and union representatives.
She has also taken a leaf out of the Clark handbook, meanwhile, by slowing down some of Labour’s reforms – tax, for instance – and punting them out to working groups.
But business confidence is only one of Ardern and Robertson’s headaches.
Midwives marching in the streets in their thousands, and nurses protesting outside hospitals underscores the huge and building expectations on Labour over its first Budget.
Some of those pressures are spelt out by CTU president Richard Wagstaff when he talks about the ‘‘wave of optimism’’ unleashed by Ardern’s rise and the list of urgent priorities Labour must deliver.
But his solution – raising more taxes – won’t be universally popular.
The pressure on Labour to substantially lift spending across the board, meanwhile, is building within the public service after years of belt tightening. Their lists of ‘‘must have’’ spending have got longer and more expensive.
But public opinion may not have built up the same head of steam to spend more, even if there is huge sympathy for the likes of nurses, midwives and police to get paid more.
That’s why Ardern and Robertson have been carefully damping down expectations that some of their campaign promises will be fully rolled out in this Budget.
Having already front loaded most of their spending with their pre-Christmas mini-budget – $5.5 billion over four years on Labour’s flagship families package, $2.8b for free tertiary study, and $1.4b on winter energy payments for pensioners and beneficiaries – Labour could rightly argue that the big-ticket items have already been rolled out. But as English used to be fond of reminding the media, voters are surprisingly quick to bank those things and ask ‘‘what now?’’.
Ardern has already been making some noises about having to ‘‘phase’’ in cheaper doctors’ visits, initially promised from July 1.
Whether Labour is just being cute by under-promising and overdelivering remains to be seen. It’s an age-old trick of government, after all.
But Labour is also pleading poverty in part because of coalition commitments, like NZ First’s $1 billion a year regional growth fund and a likely big boost to the spending on the Ministry of Foreign Affairs, promised by Foreign Affairs Minister Winston Peters.
Cheap doctors’ visits go to the heart of the change that Labour promised on the campaign trail. Spending on foreign affairs? Not so much. Voters are unlikely to see sacrificing one for the other as a fair swap
That’s the balancing act that Ardern and Robertson will have to manage. And a lot is riding on them getting it right.