John Armstrong: Captain Sensible braced for storm

The economy may be about to catch a cold. But Michael Cullen looks like avoiding the particular strain of the Sars virus striking down finance ministers across the globe - severe acute recessionary syndrome.

What Dr Cullen describes as a "clutch of malign influences" - weak investor confidence, international economic uncertainty, falling returns to dairying, the impact of Sars on tourism, the electricity crisis, the rising dollar, drought and damaging spring frosts - could combine to slash growth in half in the next year.

Even then, Budget forecasts have the economy chugging along at 2.2 per cent. Even the worst-case scenario has it growing by 1.9 per cent.

All of which is bad news for Opposition parties who must be privately praying that the economy seriously sours on Labour, even if they will not say as much publicly.

Sure, the projected growth rates go little towards meeting the Government's goal of New Zealand making it into the top half of OECD nations.

But the Opposition was punching at air yesterday because there was little to punch at in what amounts to a wait-and-see Budget.

So conservative is the document that National and Act were reduced to criticising it not so much for what is in it, but for what is not in it.

And there are glaring absences, such as what to do about the power shortage long-term and the country's wider infrastructure deficit.

But it is difficult to land a big hit on someone racking up big surpluses yet preaching precaution in the face of pending adversity.

Thus, Dr Cullen portrays himself as Captain Sensible battening down the hatches before an approaching storm while resisting siren calls for huge dollops of extra spending.

In fact, the Budget contains $1.6 billion in new spending - $500 million more than he foreshadowed in his fiscal update last December.

He is not quite as parsimonious as he would like us to think. But you have to read the fine print.

The impression of restraint is reinforced by the Budget spreading modest amounts of cash across as many areas as possible, thus touching most voters in some kind of way.

So, Aucklanders get another 50 police; small businesses get a subsidy to help them meet their tax obligations; low-income workers get a tax break on their employer-contribution pension schemes. And so forth.

The modesty is summed up by the intention to build an extra 300 state houses. Sounds good. But the Government was already planning to build an extra 3000 such homes anyway.

The Budget's air of caution is reinforced by Dr Cullen flagging "significant improvements" in assistance to low and middle-income families next year, if circumstances allow.

The delay may be prudent, but it is also clever politics.

Presumably, families will not get the extra cash in their pockets until October next year or even April the following year, by which time the country will be only months away from the next election.

In the meantime, this year's Budget - Dr Cullen's fourth - follows the pattern set by his first.

Priority is given to education and other building blocks for constructing a high-skilled, innovative economy. Health is allowed to soak up more cash to keep it off the political agenda. Social assistance lags behind in third place.

Dr Cullen prides himself on being boringly consistent.

As he observed yesterday, he is not a finance minister whose Budgets try to turn the world upside down.

But he will be crossing his fingers that uncertain times do not turn his world upside down.