Finance Minister Grant Robertson gives Budget 2021 speech during lockup. Video / Mark Mitchell
OPINION:
Budgets have lost a lot of their fizz over my political lifetime, for good and less good reasons.
The Public Finance Act, quite rightly, imposed more rigorous disclosure requirements on governments, denuding the Finance Minister's speech of much of its "will the economy collapse or won't it" melodrama.
Politicaloperatives on both sides then coalesced around a drip-feed media strategy that foreshadowed major announcements so exhaustively in the days and weeks prior that Budget Night itself shrivelled into a ho-hum highlights reel.
Finally, it was shifted from primetime to mid-afternoon, cementing its decline from ratings blockbuster to lame afterthought.
By contrast, last week's Budget was showstopper – a refreshing blast from the past.
There is a tendency among centre-left politicians, not just in New Zealand but elsewhere too, to work so hard to assuage fears from the Big End of Town of reckless socialism that they lose sight of why they were elected in the first place.
It arises from the faulty, but deeply entrenched, belief that, while leftwing governments may be great at health and education, they will inevitably drag the economy to the precipice of collapse through fiscal mismanagement.
Finance Minister Grant Robertson and Prime Minister Jacinda Ardern on their way into the House for the reading of the Budget 2021. Photo / Mark Mitchell
Research undertaken over many decades and in many jurisdictions, from Wellington to Washington, demonstrates beyond doubt that this is nothing short of a myth.
Take the example of public debt. Helen Clark's fifth Labour Government reduced debt from 22.6 per cent of GDP in 2000 to 5.5 per cent in 2008, also going from a $386 million deficit in 2001, to a $2.8b surplus in 2008.
During John Key's National Government, debt as a percentage of GDP went from 9.1 per cent in 2009 to 24.6 per cent in 2016. Its defenders will explain away the discrepancy by citing the GFC and Christchurch earthquake, but that just begs the question, "How much worse would it have been without Clark and Cullen's prudent fiscal management?"
Despite all this, on my side of politics, we are sometimes prone to acting as if we can't really trust ourselves with the books – even when history shows the opposite to be true.
My fear that Robertson has succumbed to this mythology appears now to be unfounded. What he delivered last week was a Labour budget through and through. He delivered it while maintaining modest and manageable debt levels, and without scaring the horses via big tax hikes.
There is room to quibble with Robertson's assumptions – arguably there is far greater scope for borrowing and spending than he is willing to contemplate – but within the confines he set for himself, he produced a document of both substantive accomplishment and considerable political skill.
Budgets are inevitably a balancing act. There's some scepticism about the underlying economic forecasts, but it's worth remembering Treasury has been far from bullish of late.
Grant Robertson last week delivered a Labour Budget through and through. Photo / Mark Mitchell
According to its estimates, growth is expected to rise from 2.9 per cent this year to 4.4 per cent in 2023. In line with this, unemployment is set to fall to 4.2 per cent by 2023, and house price inflation to 0.9 per cent in 2022. If these prove close to the mark – especially on house prices – it will far exceed even the most optimistic assessments as the pandemic took hold.
The boost to benefits was a moral necessity, but let's not forget how this will also deliver a broader economic payoff. Beneficiaries spend every cent and they spend it locally.
The proposed new social insurance scheme for unemployment is another smart and welcome move on Robertson's part, reflecting the amount of work he's done on reimagining our economy and the future of work.
Likewise, his reinstatement of the training incentive will further propel what is emerging as a real success story for this Government: a rapid expansion in trades training.
Labour's Māori caucus can take a bow, securing major new funding to get the Māori Health Authority on its feet, as well as bold new investments for iwi-based housing. When it comes to addressing the supply crisis in housing, Māori across Aotearoa are uniquely equipped with the assets and know-how to drive local solutions that will ease the burden for all New Zealanders.
Taken together, the initiatives that comprise the 2021-2022 Budget offer a clear vision as the country contemplates its future post-Covid. It is an unmistakably Labour vision, one that focuses not only on jobs, but on the dignity of work.
While benefit payments alone can't overcome the child poverty crisis we continue to face, the increases will nevertheless materially improve the lives and prospects of thousands of our tamariki and rangatahi.
We still face daunting challenges brought about by historic injustices and entrenched inequality. But Robertson deserves plaudits for choosing boldness over incrementalism, and for mapping out a clear and optimistic path.
• Shane Te Pou (Ngai Tuhoe) is a company director at Mega Ltd, a commentator and blogger and a former Labour Party activist.
