Backgrounding the 2016 Fiscal Budget


On Thursday 26 May 2016, the Treasurer Bill English will deliver the 8th Fiscal Budget of the Government of Prime Minister John Key.

Aside from showing New Zealand what its expenditure priorities are for the next fiscal year, the annual Fiscal Budget is also an opportunity for the Government to show the progress that it has made in the previous 12 months. Often in between election years unless there is a particularly large surplus or necessary expenditure needed, the Government plays cautiously least its war chest is depleted when it is needed most. Mr English has been around in Parliament to know well enough though that with history not favouring four term Governments in peace time, the 8th Budget is really about cementing any economic legacy that the Government might have been trying to create. The 9th is all about showing expenditure priorities fitting for a four term Government.

Initially National’s priorities were to get the Government back into surplus. The Government accepted with the Canterbury and Christchurch earthquakes that there might have to be substantial extra spending. And there was, but what National refused to accept was that social spending would not be affected. In the last year or so, perhaps because of the third term challenge that all Governments face, it has tried to reduce the debt by initiating further spending cuts.

But are these priorities fitting for a fourth term in office? It depends very much on who one talks to. For those who envisage an economy based on laissez faire capitalism, the views are probably largely favourable. The Government has actively pursued fair trade deals with whomever it could get the attention of. The social spending has been cut back and hints are being dropped of the income tax being lowered if the Government of Mr Key wins the 2017 General Election. They will also point to the very high expenditure caused by the bailing out of South Canterbury Finance, which collapsed in September 2010 – though I wonder if the Government had known a big earthquake causing N.Z$4 billion in damage was going to occur three days later, whether it would have done so (to say nothing of the 22 February 2011 quake).

And perhaps in terms of fiscal responsibility the centre-right might have had a point initially. However five years after the quakes, with debt ballooning, very little still left to shave from social services without causing long term lasting damage and crime being higher than the statistics suggest, the fiscal challenges facing National are beginning to mount.

The centre left, despite arguing that the Government has its priorities wrong, has actually been surprisingly reluctant to show its own priorities. Some might say this has to do with the polling showing the Government still comfortably leading midway through its third term. Some might say that the civil war in Labour has not yet ended and that making good policy is impossible until they do.

And so we await the 8th Budget of Mr English. Will he put more money into Police to help deal with the surge in ram raid violence at service stations; maybe an injection into mental health funding; maybe a one off splurge on getting people on hospital waiting lists sorted. On Thursday all shall be revealed.

 

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