PM Chris Hipkins' pre-budget speech. Video / NZ Herald
Prime Minister Chris Hipkins isn’t waiting for the media to brand Budget 2023 with a catchy tagline on May 18.
Under pressure to look like he’s doing his bit to right the economic ship, Hipkins has jumped the queue and dubbed it “the no-frills Budget”.
Call it smart, shrewd orcynical, but getting ahead on the branding shows Labour under Hipkins knows how to sell a clear and simple political message.
He’s predictably decided to go hard with the sensible, fiscally conservative sales pitch.
Looking at the challenges facing the economy - inflation, rising interest rates and a record current account deficit - it’s hard to argue with that approach.
Critics will bemoan the fact that it was Labour that got us to this economic juncture.
Some will not trust the sincerity of the pre-Budget message that Hipkins brought to the business lunch, hosted by the Employers and Manufacturers Association.
He’s not the first politician to turn up at the central Auckland venue promising fiscal caution and improved productivity.
Finance Minister Grant Robertson typically strikes a similar tone for this audience.
But Hipkins appeared to go further - and certainly took a more business-friendly stance than his predecessor Jacinda Ardern.
In fact, this was a speech that could have been delivered by Bill English.
Hipkins highlighted strong immigration numbers and talked about reducing government spending. He ruled out new taxes - including the dreaded capital gains tax - and pointed new spending in directions that would boost economic productivity.
“Skills, science and infrastructure” was the mantra; conveniently a very similar mantra to the one we’re used to hearing from business lobby groups - like the EMA.
Business leaders have been listening to politicians talk about improving New Zealand’s productivity at these lunches for at least the 20 years or so I’ve been covering them.
Those on the ideological left might be wondering what’s happened to Labour’s social agenda or even the rich-baiting tone taken by Revenue Minister David Parker after the big tax report just a day earlier.
So to recap, there will be no new taxes in the Budget, not even to fund the multibillion-dollar cyclone rebuild.
That will be funded with a mix of debt and savings from “reprioritised spending”.
Government spending will keep falling “tracking down towards the low thirties as a per cent of GDP,” Hipkins said.
That doesn’t necessarily equate to austerity of course, with Crown spending still tracking down from very high levels through the pandemic.
“That is about where I would like it to settle. Living within our means is an important economic goal for me, professionally and personally,” he said.
But setting to that level of spending had to be done carefully and over time, he warned, in what might have been the most left-leaning note of the speech.
“If we tried to get there in this Budget for instance it would require some dramatic cuts to services and cost of living support that New Zealanders rely on. We are taking a balanced approach that reduces our spending while also delivering core services.”
It was hardly Chairman Mao.
Hipkins went on to highlight his austere outlook by talking about how he does his own grocery shopping at Pak’nSave.
Back on what we can expect on May 18, he hinted that there would still be some form of further cost-of-living relief, although how that will be managed to avoid adding to inflation remains to be seen.
Presumably, it will need to be highly targeted.
Otherwise, new spending will be pushed towards longer-term economic goals - that mantra again - skills, science and infrastructure.
These will likely be projects that have long enough horizons to take them out past expected horizons for high inflation.
Again, it’s hard to fault investment in these areas.
In the early years of Finance Minister Bill English, government spending as a proportion of GDP was much the same as it has been under Grant Robertson. Photo / Mark Mitchell
It will be up to voters to decide whether this version of Labour has the will and the competence to deliver on them.
Hipkins seemed energised by his recent trip to Australia and the upcoming trip to Europe and the UK.
He talked about the promotion of new and improved pathways for exporters. That’s good -we’ll need them if we are to address the country’s worrying current account deficit.
His emphasis on re-energising Closer Economic Relations (CER) with Australia was strong and promising.
Relations with the Anthony Albanese Labor Government are clearly good right now and that offers the opportunity to enhance the revenue we earn from New Zealand’s largest trading partner.
This kind of stuff is hardly sexy politics but it is more credible than the usual shout-out to the gods of greater productivity.
It’s an area that highlights Hipkins’ renewed energy. With that and the sharp political positioning being done by party strategists, it leaves Labour well-placed in the races for the electoral centre ground.
