Editorial: Budget that could have been bolder

The Treasury has, according to the Minister of Finance, a "relatively benign view" of the country's prospects. The public should have a similar view of Dr Cullen's second budget. He has adopted a restrained position that gives a little, promises more and, most importantly, resists the aberrant spending initiatives that might have characterised a coalition Government.

Few provisions of the Budget had not been foreshadowed and Dr Cullen had made it clear on a number of occasions that he did not have much room to move on spending, even given the rise in his spending cap from $5.9 billion to $6.125 billion. That was a prediction on which he delivered, and the list of disappointed ministers will be significantly longer than that of those whose wishes he satisfied.

It was the responsible course to take. It has balanced the uncertainties of the world economy against the need to promote growth. It would have been easy for the Treasury and its minister to take an extremely cautious approach in case the American, Australian and Asian economies did not recover at the expected rate. The result would have been a round of belt-tightening that may, if recovery was on track or better, prove unnecessary.

Equally, the Budget could have been predicated on optimistic growth rates that left a hole in the Government's coffers. Dr Cullen has done neither in respect of spending over the next 12 months. The middle course was the right course. He has, however, put a rosier glow on spending in his longer-term forecasts which give room to stock his election year war-chest and, beyond 2002, to make promises that can be eroded by time and circumstance with less political impact.

The Budget makes much of the need to transform the New Zealand economy and to achieve a level of growth more commensurate with that of other developed countries. Dr Cullen is right when he suggested that New Zealand needs to increase its sustainable growth capacity from about 3 per cent to 4 per cent a year, or more. He joins many in the private sector who have been preaching that message loud and clear.

So the rhetoric was on the right track but delivery mechanisms, not words, are the issue. Does the Labour-Alliance Coalition signal the means of achieving fundamental change that produces a dynamic economy? In some areas, yes, but in many others, no.

It has identified education as a key factor in bringing about that change and has identified some funding sources to start the process. It has recognised the need to fund and encourage research. However, it has taken entirely the wrong approach to ensuring that education meets the needs of a changing society.

The tertiary sector has told the Government in no uncertain terms what it thinks of the new general funding level. As if that was not bad enough, the Tertiary Education Commission that occupied a significant part of Dr Cullen's speech is a form of centralised control that could rob universities of their most precious right - academic freedom. The commission represents the exact opposite of dynamism, the very commodity that will bring about the change that both Government and private sector crave.

Read in conjunction with the Government's plans to exert an unacceptable level of control over university councils, this has the potential to straight-jacket institutions to the point where Wellington-bound bureaucrats dictate what is taught, where and by whom.

The Government is right in identifying a need to achieve some rationalisation within the sector. There has been a proliferation of tertiary teaching institutions, not all of them successful. Its draconian approach, however, will injure more than it heals.

The rhetoric also says the right things when it speaks of supporting entrepreneurship, excellence and expanded trade opportunities. It makes some modest gestures in this direction but where are the measures to improve the fundamentals of competitiveness - taxation rates, compliance costs, flexibility and infrastructure? Most businesses would look at yesterday's budget and go back to business as usual.

Helen Clark's Administration would spur this country to new heights if it demonstrated that its words were backed by fiscally responsible but fertile initiatives. Dr Cullen could have been bolder.

www.nzherald.co.nz/budget

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