Finance Minister Grant Robertson. Photo / Mark Mitchell
Does Covid-19 make Thursday's Budget the most important in history or render it redundant?
Setting the right path for Government policy as we move out of survival mode and start rebuilding will be crucial.
But it may just be too soon for big decisions.
With so much uncertainty about the duration of the pandemic and the fallout from lockdown, Finance Minister Grant Robertson can't yet afford to allocate too much of the billions of fiscal stimulus he has up his sleeve.
We'll get plenty of big numbers, most of them in red ink. Treasury's fiscal projections will be epic in scope adding tens of billions of dollars to our national debt.
But they will also be highly uncertain — not necessarily more useful than those of many economists already modelling the pandemic damage without a clear fix on the time frame.
"I'm expecting it to be long on talk and short on detail," says independent economist Cameron Bagrie.
The big ticket item was likely to be an extension of wage subsidy scheme in some shape or form, he said.
There was also going to need to be more targeted assistance for business on a sector by sector basis.
Bagrie said he'd heard some suggestion Robertson might look to more direct government lending to business.
Treasury's fiscal projections would likely have core crown debt heading up towards 50 per cent of GDP, he said.
That takes the country back to levels we haven't seen since the recessionary days of the early 1990s and raises serious question about the longer-term pathway.
But next week was not the time to address that.
"I'll looking at the spirit of the fiscal projections," Bagrie said.
That spirit would be "that we're leaning on the Government balance sheet" to spread the shock of the pandemic, he said.
ASB chief economist Nick Tuffley agreed this was not a Budget where we should be "too hung up on the numbers".
"I think what we've got to recognise is that whilst in the past Budgets have been very set in stone, this is one where we'll be getting decisions made along the way based on what appears to be the need," he said.
"The Budget will lay things out but it would be a bit unreasonable to expect the exact expenditure pattern the Government will commit itself to over the following year."
Robertson himself has this week downplayed expectations around big bang announcements.
"This Budget was just one day in a series of announcements," he said. "Our economic response to Covid-19 has to happen every day, not just on Budget Day.
We should expect to see a big funding allocation put aside which hasn't been specifically earmarked for anything in particular, Tuffley said.
The most important thing would be using the opportunity to provide more support for business and jobs in the short term.
"The priority for this Budget, and most probably next year, is going to be about just helping get the economy back up and running and what policies are needed for that. Then once you've got growth picking up momentum you can go back a bit harder on what spending we need to prioritise now."
The amount of certainty businesses could take from the Budget would be important, Tuffley said.
"But there is not a lot of that certainty: full stop."
One key thing would be an indication of an extension, or refining of, the wage subsidy scheme, he said.
"Because we've got to bear that, if you picked up the scheme from the first day that you were eligible, the first people will start to expire from June 9."
That put us right in the time frame where businesses were thinking about: "well if I can't afford to keep people on then I need to make a decision."
Even measuring the economic progress was going to be a challenge let alone forecasting the outlook, Tuffley said.
But the most visible impact would be the number of people who lose their jobs and the numbers on welfare support. "So we will have one fairly real time measure of what's probably the most important impact: what's happened to peoples livelihoods and incomes."
Broadly though, the Treasury forecasts on Thursday would just be a rough guide.
The most useful part would probably be in their scenarios, he said.
Last month Treasury produced a range of different forecasts based on different degrees of pandemic severity and lengths of time at various levels of restriction.
New forecasts will likely update those.
"So they will be useful," Tuffley said. "But we're not going to be bound to a corner like we have been in recent years where you can't spend $100 million because it will push you over some arbitrary debt line."
"We know debt is going to build up quite rapidly and it is going to be a slow grind out. It is going to be a huge sea of red in the figures."
ASB is picking a Budget spending package of circa $15 to $20 billion, representing a doubling of the initial Covid-19 economic response package.
It expects net core crown debt to lift to over 60 per cent of GDP and with" a massive lift in the NZ Government bond programme."
As well as promising flexibility and pragmatism in his pre-Budget speeches, Robertson has also talked up the prospects of more radical economic transformation as part of the longer-term rebuild.
"There are few times in life when the clock is reset," he said in his speech to the Wellington Chamber of Commerce this week.
The rebuild would provide opportunity to address long-term issues like the environment and social inequality, he said.
"It is a privilege many countries won't have. It's not one we should squander."
That's the bit that is making Bagrie nervous.
New Zealand would be economically vulnerable with Crown debt above 50 per cent of GDP.
"The reality is we will have to pay the piper for that out the other side," he said.
Broadly there were three ways a government could deal with debt long term.
One was to contract and cut spending, as they did in the 1990s.
History suggested that wasn't the right move and it wasn't something you'd expect from a Labour-led government, Bagrie said.
Another way was to enact policy which lifted productivity and boosted economic growth.
This was the best way forward, he said.
It's one we're likely to hear Robertson emphasise.
But Bagrie was sceptical about delivery.
"They'll need to lift their game," he said.
They had been very good at crisis management in the past few months but their track record prior to that had not been good, he said.
That meant tax increases were probably inevitable even though we wouldn't hear anything about them this year, Bagrie said.
Signals about when the Government sees a return to surplus and where it sees its longer-term debt target would offer clues to the path ahead, he said.
All modern Budgets involve an element of political theatre. Next Thursday's may rely more on that than ever.
Robertson's balancing act will be to provide a sense of certainty about the government policy path without over committing funding in areas where the need is not yet certain.
He will need to offer a sharp focus on the immediate challenge of nursing the economy through the next few weeks and months.
At the same time he will need to share a credible and ambitious vision for the longer economic rebuild.
The trick may be convincing us to trust him and accept that the unknowable details of the medium-term recovery will be dealt with in good time.
Liam Dann takes a deeper dive into the week's economic news