Editorial: Debt payment may be best we can expect

Bill English. Photo / Mark Mitchell

When Bill English surveys the economy in his Budget this afternoon, he will celebrate relatively strong growth arising from continuing immigration gains. In this context, even the country's most pressing economic and social problem - rapidly rising house prices - is a problem of success.

The Government would like to see a slower rate of increase but not a halt. It is content to feed the demand with ever more houses if only the capacity can be found to build more of them and councils issue faster consents.

Budgets have been saying this for several years and the Finance Minister has given no hint that today's will offer anything new on this front.

Mr English has been talking instead about "social housing" and the minister with that portfolio, Paula Bennett, says the Budget will show "there is a lot of work happening". Social housing, incorporating emergency housing, is a timely subject with the weather turning wintry and reports of overcrowding and some families resorting to living in cars.

Prime Minister John Key's advice that those people approach the appropriate state agency for housing assistance has not been well received. The Budget needs to produce a better answer.

But whether that means selling more state houses to contracted charitable agencies or building them again, the shortage at the poorest end of the housing spectrum is easily fixed in comparison to the continuing runaway demand for investment property. The Government seems to have given up entirely on attempts to dampen demand after the failure of last year's tax measures to do more than temporarily slow the market over the summer. In fact, considering the unusual level of trading last winter, ahead of their October introduction, it's likely prices are now no lower than they would have been had nothing been done.

If the damage being done by speculative investment is in the "too hard" basket for this Budget, what else might we hope to see? The recently announced budgets for the United Kingdom and Australia this year have contained some effort to crack down on tax avoidance by multinational companies that can account for their profits where they will face the least tax liability. Mr Key has said he shares the international resolve to close opportunities for profit-shifting and it will be disappointing if this Budget does not turn his words into action. At the least, the Government should stop equivocating on OECD proposals for action.

Mr English has made social policy pragmatism the central principle of his Budgets. He measures value not by the money he spends on a social need but by the returns he can measure against a set of concrete goals, such as disease reduction and NCEA success rates. To that end, he is bringing forward additional spending in next year's Budget, reducing the surplus he might post and leaving little prospect of tax cuts this term.

The first call on a surplus needs to be debt reduction. The Government has been adding to the national debt ever since it came to office. It has peaked and now starts to come down. That may be the Budget's best line.