Join Thomas Coughlan as he provides a summary of all you need to know from the governments budget announcement 2023. Video / Mark Mitchell
Opinion by Thomas Coughlan
Thomas Coughlan, Deputy Political Editor at the New Zealand Herald, loves applying a political lens to people's stories and explaining the way things like transport and finance touch our lives.
A minor obsession of the political world right now is the relatively historic poor polling of both major parties. They each cycle through their respective phoenix and ashes stages, but rarely are they both stuck at the same place at the same time.
National and Labour are currently lockedin a liminal state between decline and ascendency. Making things more difficult is the fact the tired incumbent Government has a fresh new leader, and the insurgent opposition has a stale and tired one.
Politics is a kinetic game. It’s all about motion and direction, but it’s not clear now who is on the way up, and who is on the way down.
Our two major parties have decided to retreat to conservatism in Budget week - potentially a reflection of their tight polling.
Labour ministers are currently speed-dating regional chambers of commerce in a desperate attempt to rouse affections for their 2023 Bleurghget, a flaccid set of spending promises in which the good (and there was a lot of good and essential - the expansion of early childhood education, KiwiSaver contributions for people taking planned parental leave, the long overdue funding boost to Te Matatini and shoring up the country against foreign interference) were outweighed by the bad: a neglect for the worse-off, costly middle-class welfare, and a deteriorating fiscal position.
Labour seems to have decided against tax cuts this election. Fair enough - Chris Hipkins isn’t wrong in saying that giving meaningful tax relief like National’s $1.9 billion plan would further fuel inflation unless paired with spending cuts, something Labour cannot contemplate - and something National would rather people spent less time thinking about.
National leader Christopher Luxon mismanaged his Budget response. Photo / Alex Cairns
To make the case to voters, Labour is bolting on nice-to-have spending promises onto the Budget, making tax cuts look unaffordable. This is despite a very reasonable argument made in favour of tax cuts: that the brackets were last set a decade ago and working people on ordinary incomes are being taxed excessively.
If Labour wanted to fund this in a non-inflationary, leftish way, it would raise taxes on the wealthy to give the less well-off some hard-earned income back, but they appear too timid for that.
Instead, the party is trapped in a cycle of adding small spends to the flavourless fiscal recipe, burying it in layer upon layer of policy condiment, and braying Ruthenasia at any opposition member with the temerity to suggest the proliferation of ornamental initiatives is excessive.
The battle over the size of the state is a difficult one to referee.
National is technically right when it says Labour is spending a billion dollars a week (over the course of a year) more than the previous government did when it left office.
The figure is correct but unfair. The famous Key-English parsimony didn’t deter that government from spending $20b more a year than allegedly spendthrift Clark-Cullen lot (who spent $23b more a year than the previous lot, who spent $4b more than the previous lot, who spent, $15b more than the previous lot … and so on and do on until the first appropriations bill of Pericles - it’s called inflation folks!)
The state is bigger than it used to be. It’s 33 per cent of the total economy now, versus a little under 28 per cent in 2017.
Getting it back down to the Key-English size would require a reduction of about $22b - a cut no one would currently contemplate, and roughly $5b of the increase in expenditure under this government is due to the increased cost of superannuation thanks to more people living longer (National wants to slowly raise the eligibility age to address this) . A figure of $17b-$22b is a fairer firgure than $52b. It’s far smaller, but it’s still a sizable increase, and New Zealanders are well entitled to ask whether they feel much better off for it.
Despite profound increases in the core health budget, which has metastasised from $14.1b in 2018 to $22.7b now (a figure that excludes billions in Covid top-ups and increased spending on disability), we lack transformational change like meaningfully cheaper GP visits or dental care.
Are people really getting better outcomes from the Budget? Photo / Greg Bowker
Elsewhere, we see Victoria University contemplating cutting hundreds of staff, citing a $33 million deficit. This in a year when the Government pulled $280m out of its Fees Free tertiary policy (over four years) to fund other initiatives in the Budget ( of course they’ll need to find some of that $280m again if, all of a sudden, students decide to enrol in university in the next four years as they no doubt will when the labour market loosens up as a result of higher interest rates).
Government spending per tertiary student has declined in both nominal and real terms this Government, dropping from $18,600 in 2018 to $18,500 this year, a figure that works out to be about $15,600 if you adjust it back to 2018 prices - a real terms cut. This from a government that still promises to lead us to the sunny uplands of a highly educated, highly paid, highly productive economy.
But Labour doesn’t have a monopoly on boring ineffectual ideas. It’s one half of a sad duopoly and its partner in this is more than living up to its side of the bargain.
National has an unfortunate tendency to bury its good ideas under silly gimmicks. Earlier this year a policy to make early childhood education cheaper, simply administered through the tax system, was suffocated under an avalanche of tweets and press releases about cutting excessive consultant spending.
And before the Budget, National’s very sensible policy to get Treasury to put as much effort into analysing existing spending as it does new spending (a very popular idea on the left), was sucker-punched into unconsciousness by the inane promise to provide each taxpayer with an AI-generated receipt of where their taxes were spent.
The piece de resistancefrom National was its hapless performance on Budget Day itself, when the front bench appeared to have no strategy for how they would respond (you need a strategy going in - oppositions have only about an hour with the document, meaning the chances of failure are high) beyond a scripted — though not wholly inaccurate — “blowout Budget“ slogan.
Instead, National jumped into the deep end, vowing to bring back prescription charges before many New Zealanders even knew they’d been abolished. It’s worth wondering how many voters were introduced to abolition policy through stories about National promising to bring them back.
I spoke to one person this week whose outrage at that expensive, untargeted policy was actually exceeded by their outrage at National’s bullish promise to repeal it on Budget Day.
This misdirection was mirrored by a hapless performance in the debating chamber that could scarcely have been more risible had Christopher Luxon brought the supplementary estimates down upon his head with great force and left their sheafs dangling about his neck like the dishevelled ruff of a McKinsean Arlecchino.
With such stale major parties, it’s little wonder the minor parties are performing so well. Act’s “have you tried turning it off and on again?” approach to the public sector has some appeal over sludge incrementalism, as does the Greens’ doubling down on more tax, spending and debt.
