Editorial: A prudent but limited Budget

Opinion

Michael Cullen will have taken a particular delight in the Budget he delivered yesterday. It is the first he has produced with the economy at a low ebb and has provided him with the pay-off for years of fiscal caution. Having salted away surpluses in the good years he is ready to spend through the present trough.

His operating surplus, expected to be $8.5 billion for the fiscal year ending next month, is budgeted to fall to an average of $4.8 billion over the next four years. His cash position, $1.8 billion in surplus this year, is forecast to go into deficit over the next four years, though Inland Revenue disagrees with the Treasury's calculations on that score. Either way, Dr Cullen is in a more expansive mode now.

Taking his cue from National's finance spokesman perhaps, he has decided the public debt need not be reduced much further. The gross debt is to be maintained around 20 per cent of GDP, helped by the assets of the superannuation fund which will finish this fiscal year at $10 billion.

So far so good for fiscal management. But having budgeted more than $12 billion extra to spend over the next four years, the Government has been singularly unimaginative about the investments it has chosen. It puts its policies into three broad categories: upgrading the economy, assisting families and promoting a sense of national identity. The first category includes tertiary education, assistance to research and new exports and improvements to the economic infrastructure.

It is infrastructure that receives the lion's share of attention in this Budget. Transit NZ's state highway building programme is restored with a windfall from Meridian Energy's sale of an Australian asset and, at long last, the use of all petrol excise for roading improvements. The Budget will be noted for road building if nothing else, especially since its other intended thrust, into Telecom's line service, was leaked earlier.

Roading and faster telecommunications are worthy targets for the Government's funds and regulatory power, but little attention appears to have been given to the deficiencies in the electricity network and new fuel sources for power generation. And infrastructure of all sorts is just a prerequisite for economic improvement. The energy, ideas and skills that produce more valuable products and services come from education, market knowledge and incentives, entrepreneurial spirit, investment capital, flexible rules of employment and business competence. The Budget scatters money in some of those directions but not all and not much.

The abolition of interest on student loans will cost more than $1 billion over the next four years and is unlikely to improve the quality of educational investment. Much less, $33.5 million, is devoted to tackling the problem of poor literacy and numeracy among low-skilled workers, and not much more is allocated for increasing the numbers in apprenticeships. Similar amounts are budgeted for more generous terms of student allowances and bonded scholarships.

This is a Budget of bits and pieces rather than big ideas. The Government's chosen three themes lack a genuine sense of direction. Even the roading projects that form the centrepiece of new spending are hardly exciting. As the first Budget of Labour's third term, this one underlines its limited vision. The Government came to office promising no more upheaval and that remains the extent of its mission. It is content to manage the economy conservatively and see that the low paid are not left behind. And the economy continues to perform well under that caution. This Budget should see us through a downturn that already seems milder than might have been expected. Perhaps we should not expect more.