This Budget acknowledges that we must invest in the down cycle of the economy. Photo / Mark Mitchell
This Budget acknowledges that we must invest in the down cycle of the economy. Photo / Mark Mitchell
COMMENT
Much has been written and moralised in regard to Grant Robertson's 2019 "Wellbeing Budget".
The elephant in the room, and one which sets this Budget apart from all other Budgets stretching back to 1993, is this Government's moving of its debt target.
Finance Minister Grant Robertson announced that thedebt target would be moved from 20 per cent to a spread of 15-25 per cent.
This is the first time a government has honestly communicated to the constituency that the debt target has been increased- if required. Prior to this, there was the golden rule of orthodoxy, as implemented by Labour's Roger Douglas (Finance Minister 1984-1988) and then embedded in our constitution by Ruth Richardson in 1991 - by her "Mother of all Budgets" firstly, asserting austerity measures never previously seen in New Zealand and secondly affirming a process of overt financial management by applying the Fiscal Management Act 1993.
As a nation, we are at the end of mining out the tailings of this policy, and it is no longer fit for purpose in this new century.
The problem with the orthodoxy of Douglas and Richardson is it ensured governments would only spend funds when the economy was in the up cycle, and then refrain from investments in the down cycle.
This meant that crucial infrastructural progress required across generations and therefore across governments were withheld. It was a famine or feast. The net result of this setting is that we are tens of thousands of houses behind for our growing population. We have infrastructure programmes from the far North to the Bluff and from Gisborne to Taranaki and everything in between requiring urgency of investment and we have last century's infrastructure requiring replacement because it is near the end of life.
So the most important thing about this Budget is an acknowledgement that we must invest in the down cycle of the economy in, as much as we splurge in the upside.
Interestingly enough, Labour-led governments are often attacked for their poor economic management. If it wasn't for Douglas, we would never have had the neo-liberal economics of the type he implemented, and was then embedded by Richardson.
Prime Minister Jacinda Ardern and Deputy Prime Minister Winston Peters must be given the kudos for changing an orthodoxy that held us in an unfair headlock for so long.
If we look at Budget years 2014-2918, you will notice that a National-led government ran deficits of Budgets up to 30 per cent. This is never a problem to economic commentators because it shows their political bias.
Robertson sets a debt spread of 15-25 per cent, and he and Ardern are seen as worse than Bonnie and Clyde.
Add to this the fact that the bulk of taxes are paid by wage and salary earners. They also pay a significant part of the GST revenue. When prices move up, they have nowhere to run and hide because they cannot off set their income against their businesses as business folk can.
Who pays the most tax? Graphic / NZHerald
A 15-25 per cent debt track (total NZ debt $156 billion) compares with Australia's total debt of about $356 billion, America's total debt of $33 trillion and the Japan's total debt of $15 trillion.
The final take out from Budget 2019, is that money was invested in the humanity of Kiwis rather then always being bench marked against what has always gone to the top end of town.
It is time that we started to talk about the adverse impact of the 1990s, which have led to some of the fastest growth in inequality, known to the OECD countries of which we are a part.
The fact we have preventable diseases such as measles, tuberculosis, whooping cough and rheumatic fever is a blight on all New Zealanders. The fact that we have people sleeping in cars or rough, lining the streets begging is unacceptable and needs to be addressed urgently.
These issues are merely the tip of the iceberg. Add to this the suppression on wages and salaries for nurses, teachers and others, together with the suppression of investing in our schools and hospitals, and you get the picture that something just has to change.
Moving the prescribed debt level 5 percentage points north allows further head space of up to $15 billion.
It is imperative that these funds are experienced wisely and in as a measured way.
Incidentally, this is not a pro-Labour spin piece. Remember: The mugs threw me out.
