Surplus welcome but storm clouds ahead

TWO cheers for the Budget surplus. After many years of labour, Finance Minister Bill English has delivered a $414 million mouse (in a budget of $95b).

Bankers and money-men will be pleased; National voters will think their Government has cemented its reputation as the expert on the economy. Few voters will be throwing street parties.

The surplus is good news as far as it goes, which is perhaps not very far. A small deficit would have meant more or less the same for the economy, but was less plausible as a political symbol. This was a goal set by National for itself, and it was more attainable than some of its other goals, such as closing the income gap between Australia and New Zealand. But English has managed to reach his target.

Everyone knows he will have trouble doing the same next year. The ‘‘rockstar’’ economy is having a lie-down after its high-energy activity last year. Growth is back to 2 per cent-plus instead of 3 per cent-plus. Major export markets such as China are slowing and in some economic turmoil, though the dollar has usefully fallen.

As an index of prudent financial management, however, the surplus would have been similarly welcomed by a Labour-led government. Grant Robertson is anxious to downplay the achievement, but if he was the finance minister he would be crowing too.

And of course there were all the usual budget manipulations behind the surplus. There was the standard tactic of milking the ACC accounts after warning of an imminent meltdown in the scheme. There have been some brutal cuts and some economies that in retrospect were clearly wrong. The decision to freeze contributions to the Cullen fund was a mistake. The fund has grown like topsy.

There are other strategic economic decisions about the Budget that National has simply fudged or ignored.

The ageing of the population is a serious problem and it will cost a heap. Prime Minister John Key foolishly promised not to alter national superannuation, and has never explained how the country is supposed to fund it when the numbers of retiring baby boomers become a flood. Labour, too, has laid up trouble for the future by canning the proposal to raise the age of entitlement.

National was right, of course, to try hard to bring order back into its accounts while also doing some sensible Keynesian demand management. Labour would have tried to carry out the same balancing act.

It is striking, though, that English has refused to promise another surplus next year, despite repeated prodding at yesterday’s briefing. In other words, he is conceding this was probably a one-off.

Rob Muldoon once said the average voter would not recognise a Budget deficit if they tripped over one in the street. That is putting it perhaps a bit strongly. Voters don’t have detailed knowledge of a government’s accounts but most of them don’t want fiscally reckless governments.

In the meantime, serious economic storm clouds loom, and they are far too serious for cheap political point-scoring.