The $1 billion cyclone recovery Budget announcement today highlighted that one of Finance Minister Grant Robertson’s challenges this year will be convincing people that $1b is a lot of money.
It certainly used to be a lot of money in the olden days - before 2020. But the eye-watering sumsthat filled the Budget columns during Covid-19 have made it seem paltry.
Prime Minister Chris Hipkins reminded people that he had said at the time of the cyclone that the Government would back them in whatever way possible and would do so for the long haul. Photo / Warren Buckland
Robertson was clearly aware of that when he spoke about the cyclone announcement earlier today. Asked about the $100 million allocated for flood protection work - such as the building of stop banks - he said it might not seem like a lot of money, but it was.
Robertson noted that the cyclone had changed the Budget - that been drafted and needed to re-done after the cyclone. So other plans were scrapped. It’s not the first time a Budget has been limited by a natural disaster.
In his opening statements, Hipkins reminded people that he had said at the time of the cyclone that the Government would back them in whatever way possible and would do so for the long haul.
Frustration inevitably grows as time passes after such things, and those affected think progress is too slow.
The cyclone package was critical in trying to prove to people that progress was happening - and more would be coming eventually.
The package was spread around health, mental health, schools, flood protection projects, business. It was aimed at trying to ease the flow-on effects of the cyclone on people’s lives as much as the actual physical damage.
The $1 billion of funding allocated also seemed small compared to the $4.5b to $9b share of the overall cost that the Government expects to wear. Photo / Warren Buckland
The $1 billion of funding allocated also seemed small compared to the $4.5b to $9b share of the overall cost that the Government expects to wear.
It was always going to fall short in some way. In this case, orchard and business groups were quick to say it did not deliver what they needed.
Both Robertson and PM Chris Hipkins pointed out that it was just one year’s funding - and did not include the two biggies: what the Government would pay for when it came to different business sectors, or what would happen with land that was potentially no longer fit for use.
Robertson also noted more would come in the Budget when the broader package for infrastructure was revealed - such as for telecommunications and electricity - which would include the affected regions.
The decision to announce the cyclone package early was both so it was not overshadowed by other news on Budget Day, and to ensure that other news would be allowed to shine alone.
The news in question is Robertson’s next remedy for the cost of living crunch. Labour’s flagging polling means that it needs that package to impress. If people’s expectations are too high, it will risk underwhelming.
Robertson needs to be sure expectations are also in control for that other centre-piece of the Budget on Thursday - which will be the cost of living offering.
As with the cyclone recovery announcement, that seems likely to be a package of a range of measures for which the Government’s aim is to ease the cost of things on people rather than a big, expensive cash injection, such as tax cuts. Health is likely to feature strongly: it is one of the few big areas in which there has as yet been no pre-Budget announcement.
Robertson is clearly wary people are expecting some tax cuts and so he stated explicitly in his pre-Budget speech that this was not the right time for them.
That is because Labour needs inflation to ease ahead of the election. A lolly scramble might have a short-term payoff for it, but would also risk the hangover of inflation worsening at just the wrong time. It is the one number that is doing the most damage to Labour’s economic credibility.
In trying to get people to appreciate $1b is a lot of money, both Hipkins and Robertson have repeatedly said that it was a time for fiscal restraint.
It setting those expectations it is possibly being helped by National’s claims that government spending needs to shrink and be better targeted.
Hipkins has promised a no-frills Budget - so it will be judged on whether is it too frilly rather than whether it is too frugal. What he means by “no frills” is that it will be a normal Budget, similar to those pre-Covid.
The cyclone announcement was done by Hipkins, Robertson and a raft of other ministers on an absolutely mint day in Hawkes’ Bay - in Taradale, alongside one of the stop banks that did manage to hold up against the flooding.
The sun shone, it was still and the birds (and some chatty dogs) bustled about making their noises.
Hipkins will now be hoping the sun also shines on his Thursday Budget announcement.
