The good, the bad and the risky

The Press - - Opinion -

The best thing about bud­gets in New Zealand is they are just a lit­tle bor­ing. Our fis­cal con­ven­tions en­sure big changes are tele­graphed well in ad­vance.

This year’s Bud­get pro­vides more cap­i­tal spend­ing for schools and hos­pi­tals, and a fam­i­lies’ in­come pack­age that has been long ad­ver­tised.

More sur­pris­ing was the sub­stan­tial rise in tax rev­enues from stronger than ex­pected eco­nomic growth fore­cast for the next sev­eral years.

Part of the rea­son for that is Trea­sury now fore­casts that net mi­gra­tion will drop by less than pre­vi­ously ex­pected. Stronger net mi­gra­tion means stronger eco­nomic growth, which means higher ex­pected sur­pluses. All of which gives the Gov­ern­ment about a bil­lion dol­lars more to play with per year than was fore­cast in De­cem­ber – $5.3b more through 2021-22.

It will need that head­room. The en­ve­lope re­mains tight in part be­cause of all of the things not in the Bud­get. Pay eq­uity claims for so­cial work­ers, ed­u­ca­tion sup­port staff, school sup­port staff and oth­ers are still in play and could be well above any bud­geted con­tin­gen­cies.

The Gov­ern­ment is es­tab­lish­ing a Can­ter­bury Earth­quakes In­sur­ance Tri­bunal to re­solve un­set­tled claims. But if that tri­bunal re­sults in greater pay­ments to Can­ter­bury EQC claimants than EQC had ex­pected in its last up­date, it’s hard to see any al­lowance for it.

And pro­vi­sions for my­coplasma bo­vis could eas­ily run higher than the $74m sched­uled.

An­other po­ten­tial span­ner in the rev­enue works – al­beit an ex­cel­lent one – could come through cuts in the tax col­lected from smok­ers. Tobacco ex­cise sits at over $1.7b a year. Tobacco ex­cise rates are sched­uled to con­tinue ris­ing, and the to­tal vol­ume of tobacco sold is pro­jected to drop by 2 per cent a year. This month saw the le­gal­i­sa­tion of va­p­ing and other re­duced-harm prod­ucts. If tobacco use drops by 10 per cent a year rather than 2 per cent be­cause peo­ple can more eas­ily switch to al­ter­na­tives, the Gov­ern­ment will lose over $530m in an­nual ex­cise rev­enue by 2022.

So it is good the Gov­ern­ment is main­tain­ing wig­gle room with rel­a­tively large ex­pected sur­pluses.

Also strongly to the good were two an­nounce­ments that came with the Bud­get. James Shaw an­nounced that the Gov­ern­ment will start work­ing on an in­de­pen­dent fis­cal coun­cil in Au­gust. This body will cost elec­tion prom­ises – so we do not spend an­other elec­tion de­bat­ing holes – and will watch com­pli­ance with fis­cal re­spon­si­bil­ity rules.

And, in ques­tions dur­ing the Bud­get lock-up, Grant Robert­son sug­gested the Gov­ern­ment is look­ing to­ward more in­no­va­tive ways of fi­nanc­ing new in­fra­struc­ture for ur­ban growth. Let­ting in­fra­struc­ture be self­fund­ing through levies paid by the ben­e­fi­cia­ries of that in­fra­struc­ture is key to al­low­ing new con­struc­tion and un­lock­ing hous­ing af­ford­abil­ity.

So the most in­ter­est­ing things about the Bud­get are the things not re­ally in it. There are risks buried, or not even hinted at, in the rev­enue and spend­ing fore­casts. There is op­por­tu­nity hid­den too. A larger in­fra­struc­ture ini­tia­tive would have been tempt­ing but is not sus­tain­able. And a fis­cal coun­cil cost­ing elec­tion prom­ises will pro­vide long-term div­i­dends.

The Bud­get may have been a lit­tle bor­ing. Watch for the in­ter­est­ing parts yet to come.


Fi­nance Min­is­ter Grant Robert­son, left, de­liv­ers his first Bud­get yes­ter­day, after which Op­po­si­tion Leader Si­mon Bridges gave his re­sponse.

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