Hayden Munro: Grant Robertson's Budget bets on the inflation storm passing

Grant Robertson has put himself on the side of the median voter by using the Budget to fix the big problems. Photo / Marty Melville

OPINION:

In this week's Budget, Grant Robertson has placed a big bet that the current inflation storm will pass, and the next election will be fought on territory much more favourable to the Government.

Robertson is one of the Government's lead strategic thinkers and he's clearly looked to use this Budget not only to set the political mood music for the next few months but to set up the Government's re-election campaign next year.

His strategy was simple: do something immediate to help middle New Zealand with the cost of living, while setting up a sharp contrast with National on issues like health, housing and climate change for next year.

In picking this strategy, Robertson is putting a lot of faith in predictions by Treasury and bank economists that inflation will begin falling in the second half of this year and have fallen below the growth in wages by the time New Zealanders go to the polls in 18 months or so.

If that's true, then the political landscape will look very different than it does right now.

Issues like the performance of the health system, the affordability and supply of housing, progress on climate change and building infrastructure will be much more crucial when people head into the voting booth.

Right now, the polling tells us that all these issues are taking a backseat in voters' minds because the pain at the checkout and at the petrol pump is so bad.

National sees this and has gone all-in on the promise of tax cuts.

This isn't just a matter of it being the line that Luxon and Willis repeat in every interview – they've literally spent almost all of the money available to them in an alternate budget on tax cuts already.

With a price tag of $3 billion a year, more than all of the new spending in any of the Key/English Budgets, Luxon has left himself almost no room for other big-ticket policy items for the election if he's going to spend less than Labour overall.

That's how sure the party's strategists are that inflation will win them the election.

But the big risk for National is that they've spent all their money based on where voters are at today, not where they will be come the election.

And it's here that Robertson seems to have sensed a political opportunity.

Firstly, his cost of living package aims to blunt National's immediate attacks by delivering more for lower and middle-income earners than is on offer from Luxon's tax cuts.

But it's on the longer-term issues where Robertson has done the most to sharpen the contrast between the two parties.

On health, Robertson has not only wiped the debt that has built up from years of underfunding but he's also increased the day-to-day funding for health by billions of dollars, including the largest ever increase to Pharmac. National simply won't be able to afford its tax cuts if it wants to match Labour in health without having to make huge cuts elsewhere or blow out the deficit.

Likewise on housing – with billions of dollars for new housing supply, especially social and public housing, Robertson knows there's no way for National to match him without ditching their tax cuts. The same is true for infrastructure and transport spending.

Yes, Robertson will say, National may be offering big tax cuts but they come at the expense of actually fixing the big problems the country faces – and given fully half of the proposed cuts go to people making $180,000 a year, it's not like middle and lower-income voters would feel much benefit from them anyway. We're much better off focusing support on those that need it and using that money to fix big problems.

It's an argument that places Robertson firmly on the side of the median voter. And in a world where inflation may no longer be the dominant issue of concern, it could be a very persuasive argument indeed.

Hayden Munro was the campaign manager for Labour's successful 2020 election win. He now works in corporate PR for Wellington-based firm Capital Communications and Government Relations.