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Home / New Zealand

<i>Dialogue: </i>Fine goal, pity about the policy

24 May, 2001 09:40 PM4 mins to read

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BY JIM EAGLES

Undoubtedly the best feature of Budget 2001 is its boring predictability.

Belying his mercurial personality and quick tongue, Finance Minister Michael Cullen has again carried out his promise to produce Budgets which contain little excitement and no surprises.

Business will appreciate that because it means there are no unexpected changes in policy to be coped with.

Equally predictable, however, is the fact that there is little in this Budget which will boost business or get the economy growing faster.

Dr Cullen's Budget speech rhetoric about getting New Zealand back into the top half of the OECD wealth ranking is right on target.

But the actual policies announced merely serve to confirm that, much as the Government says it wants to encourage businesses to grow, practical steps to make that happen will always take second place to the social, cultural and environmental considerations which are the more instinctive concern of Labour, the Alliance and the Greens.

There is, for instance, no thought of matching the Australian Government's decision to reduce the company tax rate from 34c to 30c (or re-unifying the top personal tax rate with the corporate rate).

There is no prospect of the level of government spending being reduced (on the contrary, the spending cap has been lifted from $5.9 billion to $6.1 billion and is likely to be lifted even further next year).

There are no moves to reduce the huge cost to business of complying with the vast array of laws and regulations which impinge on commercial life.

The main reason for the inaction on many of those fronts is that the Government has so boxed itself in - through its spending cap, the decision to use up most of the spare cash last year implementing election promises, and the launch of the superannuation fund - there is no money left to actually do anything.

As a consequence the few announcements intended to be of benefit to business are so strapped for cash as to be little more than token gestures (poor old Jim Anderton unveiled 15 economic development programmes which will get just $34 million a year between them, about the same as is to be spent on recruiting and retaining social workers).

Even the $100 million investment in a seed capital fund - applauded by venture capitalists and researchers - will go only a small way towards meeting the country's desperate lack of investment capital.

There is not even a mention of the need for greater investment in the nation's infrastructure, one area where the Government's statist instincts and the needs of the economy might have coincided (although it seems some innovative roading funding ideas may be somewhere in the policy slowlane).

What makes that the more frustrating is that several Budget initiatives are clearly based on ideology rather than finding practical solutions to genuine problems, and so represent a waste of money.

For instance, 643 new state houses are to be built, yet there is no great shortage of houses. The problem is that many people have difficulty paying their rent.

Dr Cullen is pressing ahead with his determination to put $600 million into a superannuation fund, yet it will make only a marginal difference to the viability of national superannuation. The best way of safeguarding National Superannuation would be to get the economy growing faster.

The admittedly tiny sums being allocated to economic development initiatives can help only a limited number of projects, which on past form will go away when the subsidies run out. The challenge is to create an economic climate where all businesses flourish, not a chosen few.

And that, basically, is the Budget's problem. There are no policies which will carry through Dr Cullen's wish to transform the economy. It is, in fact, fairly much business as usual. That is certainly a lot better than going backwards. But it is probably not good enough to get New Zealand moving back up the OECD rich list.

www.nzherald.co.nz/budget

Charts:

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Government Expenses

Budget links - including full text of documents

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