Budget 2024: Never mind the numbers, what’s the Budget vibe going to be? - Liam Dann

Minister of Finance Nicola Willis will deliver her maiden Budget on Thursday. Photo / Ben Dickens

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts.

OPINION

It’s Budget week. Hooray!

Let the fiscal festivities begin. It’s time to celebrate all those big numbers and exciting acronyms. How does the Obegal compare to the forecasts in the Hyefu... you know, that sort of thing.

Okay, I’m being a bit facetious here. The media makes a big deal out of the Budget, maybe more so now than ever.

Look at that snazzy logo we made to badge all our Budget stories.

On Thursday, I’ll be hosting a live video show on the Herald website. By then (I promise) I’ll be positively bursting with excitement to tell you how much of a tax cut you’ll be getting, whether the Crown accounts will be back in surplus by 2027 and how much more the Government needs to borrow over the next four years to fund everything.

In a world where the media also makes a big deal of the royal family’s sibling squabbles and J’Lo’s divorce, I think all the Budget excitement is a good thing. It’s a brief cultural celebration of some important stuff.

But I’m also aware it is still Sunday, which isn’t the best day for inflicting a deep technical analysis upon readers.

Theoretically, Sunday is the first day of the week. But in reality, we pretend it isn’t. We delay thinking about the week ahead for as long as possible.

So, in the spirit of weekend procrastination, I’ll preview Budget 2024 here without worrying about big numbers.

I have another more in-depth preview scheduled for Monday morning. That one will draw on all our leading economists’ number-crunching and fiscal estimates.

In this one, I’ll just look at (to quote the great Dennis Denuto)... the vibe of the thing.

There’s no question the vibe around the economy is dark this year. We’re still battling the tail end of inflation and the cost-of-living crisis, we’re paying higher interest rates and we’re reading about (or if you’re unlucky) experiencing the pain of job cuts across the public and private sector.

Even if you haven’t lost your job or seen your business’ cashflow collapse, you’re constantly being reminded by a slew of commentators – and the Government itself – that the overall financial position of the country is dire.

I’d take a bit of that with a grain of politically flavoured salt.

We’re going through a big and painful post-Covid rebalancing. But so is most of the rest of the world.

The economic headlines in the US, UK, Canada and even Australia are all more or less interchangeable with ours.

Sticky inflation, longer a wait for interest rates to fall, rising unemployment off a low base... etc. etc.

In my view, those comparing New Zealand’s predicament to the dire position in 1984, 1991 or 2008 have short memories.

This economic cycle has been largely engineered from the beginning. Like 1984, there are structural issues that need addressing if want to be wealthier – like our debt, our savings rates and our productivity.

But they don’t run as deep.

Meanwhile, I retain confidence that the Reserve Bank and the Government can steer us through the cyclical stuff.

Now is certainly the right time for fiscal prudence. Okay, I should say (and did say) that the right time for fiscal prudence began three years ago.

The fiscal position this Government faces is certainly tougher than it might have been if the last Government had reined it in sooner.

But in the absence of a time machine, the next best time is now.

If we take a binary approach and split the general vibe of Budgets into two categories, expansionary and contractionary, this year’s is the latter.

In other words, it should be filed on the same side of the ledger as the Black Budgets of 1931 and 1958 or Ruth Richardson’s Mother of All Budgets in 1991.

We are primed and nobody expects an expansionary Budget like we had with Sir Robert Muldoon’s Think Big Budget of 1982, Sir Michael Cullen’s Working for Families Budget in 2004 or Grant Robertson’s Wellbeing Budget in 2019.

In the days of Ruth Richardson (right), Jim Bolger (left) and Sir Robert Muldoon (not in picture), Budgets were more showbiz than economic update.

Finance Minister Nicola Willis has promised to spend less than Labour did last year.

Commentators on the political right have argued this doesn’t go far enough. Robertson was promising to spend less this year too, to be fair.

You can’t call a Budget that delivers tax cuts austere.

But Willis, to the annoyance of those on the right, has made it clear that the document she will unveil on Thursday is not designed to be an austerity Budget.

She, like most Finance Ministers, sees her Budget as balanced.

Debate about the merits of delivering tax cuts while you’re trying to get out of deficit aside, the Government is handling the political balancing act quite well.

We’ve been primed for the worst, with Luxon calling the last Labour Government economic “arsonists” on Monday and Willis warning on Thursday that there would be spending cuts which would go further than those already announced.

Then we’ve had the message softened. In a joint interview on Friday with NZ Herald political editor Claire Trevett, Luxon and Willis talked of “bold moves” and positive “surprises”.

That’s encouraging. It suggests there might be more to talk about on Thursday than just a tax adjustment and the operating balance before gains and losses (that’s the Obegal).

The trick for Willis is to present a tough Budget and retain an upbeat vibe. New Zealanders are under no illusions about how tough things are. What they need now is some positivity, some hope and some vision.

Despite the bleak outlook of their coalition partners – and their own rhetoric at times – I’m confident Willis and Luxon understand this.