Budget 2023: Mike Munro: - no splashing the cash, just focus on restraint, responsibility, recovery and resilience

OPINION

Perhaps a useful starting point for a preview of Thursday’s Budget is to look at how the Oxford English Dictionary defines “no frills”: Including only the basic features, without anything that is unnecessary, especially things added to make something more attractive or comfortable.

Such a description is hardly likely to trigger a stampede for ringside seats for Grant Robertson’s sixth Budget.

It was Chris Hipkins, in keeping with his championing of a focus on bread-and-butter issues on his watch, who first labelled it a no-frills Budget, a fitting tagline from someone with a predilection for sausage rolls and Coke Zero.

But hang on a minute. This is election year, and aren’t election-year Budgets traditionally an occasion for governments to splash the cash, just as electioneering pamphlets are beginning to be stuffed into voters’ letter-boxes?

Budget sweeteners might be the case in normal times. What’s clear is that there is nothing normal about these post-Covid, storm-battered, inflation-racked times.

The grim circumstances surrounding this year’s Budget have clearly demanded a more nuanced approach.

So as the PM and Robertson have been signalling, its political flavour will be quite different from the sort of Budget we’re accustomed to seeing at this stage of the parliamentary cycle.

So that means no pre-election spend-up, though there will be some relief for Kiwi households that are doing it tough. The expectation is that the cost of living assistance being unveiled on Thursday will be modest, unless the Government is overdoing the under-promise, over-deliver thing.

Inflation-stoking tax cuts can be ruled out, with a more likely route being the use of a targeted mechanism, such as Working for Families, to boost disposable incomes.

The political flavour of this Budget will be expressed through the four R’s — restraint, responsibility, recovery and resilience. That makes good sense as regions struggle to get back on their feet after the catastrophic summer floods and the post-pandemic global economic shock, notably inflation, still reverberates.

For Labour, it’s an approach that sets up an election-year contrast with that of their opponents’ tax-cutting agenda.

There’s a quiet confidence in the Beehive that they’re reading the public mood correctly.

Focus group soundings have shown that voters expect the Government to demonstrate prudence in the current environment and focus on what matters. Opposition promises of tax cuts are always appealing, but when people learn they might be only $8 a week better off, the response veers towards indifference.

Given the enormous flood recovery costs — Treasury has estimated the cost of asset damage from the Auckland floods and Cyclone Gabrielle could reach $14 billion — and mounting costs for maintaining core public services, there is strong “not now” sentiment around the tax relief question. It would risk fuelling inflation at the very time we might be getting on top of it.

So the need for prudence will see big investments in recovery and resilience needs, and the core public services, which are always under relentless cost pressures. They, too, have been buffeted by inflation and the supply chain disruptions that push up costs.

Rod Emmerson's take after Grant Robertson gave his pre-Budget speech outlining the savings and costs of the forthcoming budget. Cartoon / Rod Emmerson

The worrying infrastructure deficit will get attention in the name of resilience. Over the past five years this Government has spent an average of nearly $9 billion a year on infrastructure, but the ongoing demand for more schools and hospitals as the population grows, and now the need to rebuild and strengthen following the floods, will make infrastructure a key focus on Thursday.

The floods not only highlighted the fragility of New Zealand’s infrastructure.

They were also a big factor in making the preparation of the Budget a massively challenging exercise.

The Budget process is long and exhaustive. No sooner is one delivered in May, than the process for the next gets underway. By last December, the bids for Budget 2023 were in, and Robertson had a good idea of the shape of the package as he took a break over Christmas.

But then came a chain of critical events, beginning in January with Jacinda Ardern’s decision to step down.

Chris Hipkins took over the prime ministership and changed tack, nixing a number of policies such as the RNZ-TVNZ merger, the social insurance scheme and biofuel mandates. All of that, of course, had implications for Robertson’s number-crunching.

As that was unfolding the ruinous rains came, and with them the realisation that a huge recovery bill lay ahead. Meanwhile, inflation remained stubbornly high — it has since eased slightly — so adding to the complexity around finalising the Budget.

The upshot of these events was that a number of initiatives Robertson planned to include in his package had to be parked or jettisoned, which was the right thing to do. Which leads to another key consideration for a Labour Finance Minister.

Robertson will be acutely aware of a problem that’s bedevilled Labour down the years: that National is perceived to be a more trustworthy economic manager, and so better able to cope with the big economic challenges.

In an earlier age it might’ve had some basis in truth. But Robertson, and Michael Cullen before him when Labour was last in government, proved to be adroit and careful finance ministers, skilfully guiding us through stern economic challenges.

National bleats about Labour’s profligacy. Yet under Robertson’s stewardship the accounts are forecast to be back in the black in 2025/26, six years after the Covid-19 thunderbolt struck.

That’s the same length of time National took to return the country to surplus from the time the Global Financial Crisis began. And the pandemic’s impact arguably exceeded that of the GFC.

So Thursday’s Budget, more so than any of the previous five that Robertson has delivered, is about showing Labour is able to responsibly manage the public purse.

An election-year budget is the optimum time to be doing that.

- Mike Munro is a former chief of staff for Jacinda Ardern and was chief press secretary for Helen Clark.