Grant Robertson's Budget is a "rolling maul on steroids" which does a superb job in arresting the extent of the Covid-19 economic carnage to date, and (at the same time) niftily sets up Labour for the September 19 election.
Robertson unashamedly borrowed the rugby analogy from Sir Bill Englishwho described initiatives in his 2009 post-GFC Budget as a "rolling maul". It was deliberate.
Robertson holds the dual portfolios of finance and sport so you can expect much more in this vein from him and likewise with Jacinda Ardern and her "team of five million" sloganeering over the Covid-19 health threat.
Robertson ruled out company tax cuts to incentivise business (and confirmed any other taxation response would be up to the elected parties after the election).
Instead, the focus is on direct business assistance.
The centrepiece of Robertson's third Budget is the $50 billion Covid Response and Recovery Fund which was formalised by Cabinet on April 6. Much is already spent, starting with the $12.1b initial wage subsidy scheme which will be extended from June 10 for eight weeks for firms whose revenue has fallen by 50 per cent in a preceding month.
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This will give comfort to sectors like retail which are expecting revenue to remain down around at least 30 per cent even as New Zealanders return to their workplace under level 2. If revenues slump to 50 per cent, the extension will give firms time to decide whether they do have a business left if consumer confidence fails to return within the eight-week period and people keep their wallets closed. It is a stop-gap solution at best.
Robertson has leveraged the crisis to migrate to a new "Future of Work" paradigm.
Intriguingly the dynamic shifts have not sprung from the impact of AI and robotics on industries — as he predicted in his own seminal commission — but from the impact of a pandemic on immigration and tourism. The farming sector has lost thousands of workers on temporary visas who headed home and tourism is not expected to resurge to previous heights even with the return to domestic flights.
The major packages to create jobs in the environmental and farming sectors is a worthwhile investment and will mop up some excess unemployment provided people migrate to where the new jobs are.
There is an element of pure tribalism to the Budget as you would expect from a Labour minister.
But Robertson will be cautious about paying out too much more of the residual $20.2b left from the Covid Fund ahead of the September 19 election lest he is open to charges of being a fiscal spendthrift. But he does expect it to be spent over a four-year period.
Sports and arts (and media) are sectors which can expect assistance in weeks ahead and even helicopter cash payments for people in need. There will also be more detail on the so-called "shovel ready" infrastructure projects which will get a nudge.
Economic pessimists will point to the explosion in red ink.
Net Crown debt is projected to explode to $200.8b (53.6 per cent of GDP by June 30, 2024). But the debt is sustainable at today's interest rates and well below that of many economies in percentage terms.The Treasury economic forecasts seem somewhat heroic with unemployment to peak at 9.8 per cent by September and be back to current levels of 4.2 per cent in 2022.
The Government has to face the risk a vaccine will not be found to end the pandemic, as a World Health Organisation official cautioned yesterday. If so, the $55 million this Budget votes for contact tracing may well be a line item for years to come.
This Budget marks the 40th I have covered. Sir Roger Douglas' radical budgets in the mid-80s changed the economic landscape; Ruth Richardson's harsh "mother of all budgets" cut spending to arrest a fiscal crisis and Sir Michael Cullen and Sir Bill English faced huge challenges dealing with the GFC and earthquakes.
Robertson's third Budget is unprecedented in its size.
But for the rolling maul to survive in political terms, the players must pass the ball nicely. That is the challenge as the election nears.
