Need to earn our way to resilience

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

Labour Party strategists will be feeling chipper this weekend after the 2023 Budget was generally well received, and a political poll out at the start of the week had them back in the box seat — although requiring the support of Te Pāti Māori as well as the Greens to win a third term in Government.

Finance Minister Grant Robertson has borrowed more than expected to fund cyclone recovery efforts, an infrastructure resilience plan and some family-friendly policies that Labour will hope make the difference for it come election time — including free public transport for children, free prescriptions and an extension to free early childhood education.

Many middle-income households feeling the pain from fast-rising costs will see some benefits there that will relieve their own budget pressures, although the extra government spending might cause further pain for people with mortgages by stoking a bit more inflation and helping keep interest rates higher for longer. That is the hair-raising part of Budget 2023, which sees core Crown debt rising to $181bn by 2027, $21bn more than was forecast just six months ago.

Higher debt levels for longer do leave New Zealand more vulnerable to another shock to the economy: S&P Global Ratings warned that we risk running out of “headroom” on debt if our current account deficit doesn’t start coming right in the coming months (which it does expect to, thanks to a bounceback in international tourism).

This refers to our trade balance with the rest of the world, which widened to $33.8bn in 2022 or 8.9 percent of GDP — worse than the 7.8 percent figure in 2008 during the Global Financial Crisis, the previous highest since this series of measurements began in 1988.

High debt levels also leave the country less able to keep ramping up work to address our “infrastructure gap” — the value of what we should have built but have not — which the Infrastructure Commission last year estimated at $104bn. This included a “shortfall in public investment of $83bn” and an “estimated $21bn necessary to eliminate the current housing shortage” . . . and these figures will have worsened as a result of the damage from cyclones and flooding earlier this year.

Budget 2023 allocated $71bn to infrastructure over the next five years, as well as $6bn to a new National Resilience Plan. This will help to reduce the infrastructure gap — as long as planning for all this investment is high-quality and creates a growing pipeline of work alongside growth in the construction sector to meet demand.

For undecided voters there is plenty to ponder less than five months out from the general election.