Real change remains in the distance
‘Transformation” is the label the Government wants to put on its first Budget but it remains a prospect rather than a reality. Economic transformation, says the Finance Minister will mean improving productivity, moving to a low carbon economy and adapting to technological change in the jobs people do. That is the intention but for the moment, it is business as normal. The Budget Grant Robertson delivered yesterday is not so very different from those of recent years.
It looks fiscally sound, spending more than National planned, taxing and borrowing more and slowing the debt reduction schedule by two years rather than one as promised before the last election. But it is budgeting for a $3.7 billion surplus in the next financial year, rising to $7.3b in four years, which is less than the $8.8b projected by the Treasury last year but respectable. Flush with inherited surpluses and strong growth projections, the Government cannot be accused of overspending.
But health has received a $3.2b boost Robertson called “huge” . It includes an additional $750 million for capital projects, the “biggest commitment to rebuilding health infrastructure in a decade”. He had blessedly little to say about Middlemore Hospital and the previous Government’s supposed “neglect”. Health has been the fastest-growing public expense for years, doubling in 20 years, and no government can afford to lose control of it.
Doctors’ subsidies are to be substantially increased, reducing patient fees by $10 for those with community service cards, if the practice takes up the additional funding. On top of that, practices are to get a 5 per cent rise to meet increased demand on their services. Midwives have also had their remuneration plea answered with $103.6m, providing an 8.9 per cent pay increase over the next four years.
But this Government’s most urgent mission ought to be housing. Its KiwiBuild homes provided at cost price might not be cheap enough to restore hope of home ownership for all young working couples. The Budget put another $334.4m into Housing NZ and community housing providers but something more drastic will be required and could have been expected.
The Budget is perhaps a little too cautious considering the health of the accounts and the economic outlook, strengthened by international recovery, continuing immigration and strong terms of trade. The Budget contained nothing to suggest immigration will be cut in a way that worsens labour shortages. The Government “would ensure any genuine skill shortages are filled, with immigration levels that are sustainable”. In these circumstances, they may have been fiscal room for a big new idea in housing or associated infrastructure finance that might improve the capacity of the building sector.
Clearly the Government realised it first needs to reassure business owners and investors that the economic essentials are not going to change. Budget surpluses will continue, the accounts remain sound. Now the task is to keep them that way.