Finance Minister Grant Robertson at his photo op for his Wellbeing Budget 2022. Video / Mark Mitchell
OPINION
Some things made complicated are actually very simple. The $120 billion torrent called the Budget, is one example of needless complication. Politicians switch on the platitudes and the poor folk paying for it all switch off the telly.
The budget is actually just a planning process. It sets outhow much money Government will collect, what sort of taxes it will use to collect it, and what that money will be spent on. That's it.
A plan should have a goal. It should aim to solve our most urgent problems today and invest to avoid problems tomorrow.
The number one problem we face right now is a cost of living crisis. Post-Covid there is simply too much money chasing after too few goods, and it's pushing up the price of everything, including housing.
Act's Alternative Budget for Real Change would reduce spending by $6.8 billion without touching health, education, police, or any front-line service, says David Seymour. Photo / Michael Craig
The longer-term problems we face mostly come back to our low productivity growth. If productivity were a cycle race, we used to be in the lead pack with Australia, Britain, America, Canada and Western Europe.
Our old buddies are nearly lapping us now, and a new team of cyclists that we used to feel sorry for have caught up. Former Soviet socialist republics like Lithuania, Slovenia and the Czech Republic now have higher productivity than us.
Add into that a social malaise caused by ram raids, emergency housing conditions, cultural division, and the risk is people with skills and capital start voting with their feet. Once the flow starts, it's hard to stop.
We also face the return of old challenges. As China establishes military bases on our doorstep, Helen Clark's benign strategic environment is clearly over. As we live longer and have fewer children, our pay-as-you-go superannuation system needs adjusting.
If we can agree that inflation, productivity, security, and financial sustainability are our challenges, then the solutions become clear.
We need to reduce the money supply, to kill inflation dead before it gets baked into expectations. Either the Budget reels in Government spending, or the Reserve Bank will reel in consumer spending. The latter would painfully put up everyone's mortgage rates until they're too broke to bid up prices.
Act's Alternative Budget for Real Change would reduce spending by $6.8 billion without touching health, education, police, or any front-line service. If that sounds dramatic, consider that Labour has increased spending by $45 billion in five years.
That would seriously curb inflation, but it would also free up cash for much needed tax relief. Under Act's alternative, a nurse on $70,000 would be $2300 better off, to alleviate the pressure that's already built up.
Simplifying the tax system from six tax rates down to two would not only give relief to the squeezed middle, it would send a message about values. We are not going to fleece you more for every extra effort. If you work harder, you keep more. If we're going to be more productive, we need to change our culture.
Act's budget would also allow small but strategic increases in spending. Skills matter for productivity, but our teachers are underpaid, especially the best ones. Act's Budget would give principals $250 million to reward the best teachers in their schools.
We'd also raise defence spending to 2 per cent of GDP. That's Australia's level and matching them would allow us to go to them and say we want in for an independent but interoperable Anzac defence force.
We do not build enough houses. At the heart of this problem is that councils hesitate to issue consents because they cannot afford infrastructure. Act would share half of the GST Wellington collects on building activity with the local council. Under this scheme Tauranga's council, for example, would get $79 million a year for infrastructure, and more if it lets people build more homes, which it could afford to do.
Finally, we would end the delusion of successive Prime Ministers, and face reality on Super. People having fewer children and living longer means superannuation must change. We would slowly raise the age to 67, over 12 years. It's going to happen and starting early and going slowly is far better than a surprise thanks to some future crisis. Doing so would save $16 billion in those first 12 years.
If we can agree that inflation, productivity, security, and financial sustainability are our challenges, then the solutions become clear, says David Seymour. Photo / Mark Mitchell
I predict none of this will happen in Labour's budget. They will spend up big, inflation will stay with us, and mortgage rates will keep rising. Our approach to tax, education and infrastructure will keep us falling back through the productivity pack. We will struggle to respond as our geopolitical situation deteriorates. That's a pity, but Act is putting forward the ideas now, because the time will come when Labour's procrastination leaves our choices breathtakingly simple.
