New Zealand Fiscal Budget 2020


New Zealand Treasurer Grant Robertson must have been a tangle of emotions on the night before the 2020 Fiscal Budget which was delivered on 14 May at 1400 hours. So much riding on probably the single most important budget in a generation: the one that gets New Zealand out of the COVID19 mud pit.

New Zealand’s economy has taken a battering. Of that, there is no doubt. Unemployment may reach nearly double digit percentage figures, with Air New Zealand shedding 3750 jobs; 150+ at the Hermitage Hotel in Mount Cook Village; 300 at Ngai Tahu; and another 240 when Bauer collapsed the New Zealand magazine industry. Thousands more are going in the hospitality sector where the forced closure as a result of COVID19 has sent many restaurants, bars and cafes to the wall.

On one hand he had an unprecedented licence to spend on measures to get the economy going again. On the other Mr Robertson would have been nervous about whether he got the balance right between a big spend up and having enough in the bank for 2021, in case COVID19 did not clear out as fast as hoped for and to cover unforeseen emergency expenditure. And then some how dancing between the two hands, the knowledge that no matter which way he sliced and diced the pie, someone would not get enough support and might have valid reasons to be grumpy.

So, what did Mr Robertson’s Fiscal Budget 2020 do:

  • For people like me finding out that the Government has thrown another $3.2 billion in wage subsidies to businesses was very welcome news – most budgets do little for me, but this one honestly has
  • Kainga Ora has been allocated funding to build another 8,000 houses
  • 11,000 additional jobs will be created with a $1.1 billion fund to support environmental projects’
  • $1.6 billion for vocational training for those out of work and school leavers

Notably the Government had $50 billion it could have spent on New Zealand yesterday. It appears to have allocated around $30 billion of that money, leaving $20 billion in reserve. If I had to guess, Mr Robertson is wanting to make sure that there is enough in the Treasury in case COVID19 is not as finished as we think and a second wave – God forbid! – hits, in which case that is very sensible thinking.

Whilst no Fiscal Budget ever pleases EVERYONE, that was more so the case today. So many people and industrial sectors needing significant help and simply not enough money to help them all, whilst still having enough in the Treasury for a rainy day situation in 2021. Also New Zealand is very vulnerable at the moment. We are busy trying to deal with a damaging economic hit caused by a pandemic that has already taken nearly 5% off the economy, so should we have a major disaster like an earthquake or large volcanic eruption, it would be catastrophic.

Whilst not on the Government’s agenda, there are other ways we could help grow the fiscal pie, which the Government needs to consider in the near future:

  • Increase investment in research, science and technology to 2% of G.D.P. – with money being prioritized for medicine, renewable energy, alternatives to finite resources
  • Bringing back a permanent nation wide apprenticeship scheme
  • Legalize cannabis and establish the industry in poorer regions such as Gisborne, Northland and the West Coast
  • Redefine infrastructure as energy, railways, merchant marine, and invest accordingly instead of just building roads

So whilst the Government has played a largely welcome Budget in 2020, as always there are things that it could have improved on or been willing to give a try. Many New Zealanders want to see meaningful socio-economic change and are sick of the neoliberal model that only supports the very wealthy, and those with greater means than others. This cannot happen if the Government is not prepared to make changes.

 

The $7.5b question: tax cuts; election spend up; something else?


The biggest government surplus in a decade has political and economic commentators thinking: What will Treasurer Grant Robertson do with a $7.5 billion surplus?

A few certainties arise even before that question can be considered:

  1. 2020 is election year and there will no doubt be thoughts of holding at least some of it to throw at election promises in a years time
  2. Certain parties who do not need to be named are going to want – and indeed have already promised – tax cuts, specifically income tax cuts
  3. With a shaky world economy getting ever more jittery with every passing month and the domestic economy not looking so hot, economists and some politicians are suggesting that the government needs a spend up to get things moving

I have long had ideas about what to potentially spend on in the past, which have been largely social areas such as health, education and social welfare. My understanding is that the calls in 2019 are for greater investment in infrastructure critical to the 21st Century.

This suits me fine, as I have a few ideas of what it could be spent on:

  1. Research and development of a potential biofuel programme relying on the waste stream for an appropriate fuel source – take several years to get this started, but if successful modest scale biofuel plants could be established in Auckland, Wellington and Christchurch
  2. Research and development of a Waste to Energy plant for the West Coast, which would be self sufficient in terms of electricity use
  3. Examine electrification of the South Island segment of the Main Trunk Line
  4. Invest in 5G technology nation-wide instead of letting the telecommunications companies do so for reasons of national security
  5. A substantial acceleration of the billion tree programme that was announced by the Government in 2017
  6. Support a mini-home scheme

But what if the Government decided on tax cuts? Whilst there might be enough to justify some I am personally against income tax cuts because the wealthiest are always the winners, when all should be able to gain fairly from them. Such a move would certainly not be welcomed by the left wing of New Zealand politics, who believe with justification that this would only favour the very few.

A more intriguing alternative is one that almost never seems to be up for discussion. Despite the right talking about fiscal responsibility, under the last several New Zealand governments significant debt has been accrued and much of it is still outstanding. Has the ever so radical idea that New Zealand should actually pay more  of it back not strike one as a useful idea?

2019 New Zealand Fiscal Budget run down


Yesterday Treasurer Grant Robertson announced the 2019 Fiscal Budget, which is delivered in late May. It sets down the spending priorities for New Zealand.The Government made a promise that the 2019 Budget would be a budget about “well being”. Many people on the centre-right thought that the whole idea was all just fluffy feel good spending with little practical value.

At a first glance there appears to be little unexpected expenditure. Defence, education and a number of portfolio’s that have had recent major announcements knew not to seriously expect much more than what had already been allocated. As noted in other articles, the Defence Force is getting P8 Maritime Patrol Aircraft that can watch our waters, but also perform search and rescue. At some point in the next couple of years a solid decision will be taken on what shall replace the C130 Hercules as our major transport plane.

Not surprisingly the major beneficiaries of Budget 2019 have been those who need social welfare assistance from the Government. One of the several measures introduced is to index benefits to wages, which stands to affect about 339,000 individuals and families.

Schools were a surprise winner. Despite the teachers being on strike and Minister for Education Chris Hipkins being adamant there is no more available, $1.2 billion has been set aside for maintenance and upgrading of school property. This will help fund new class rooms for expanding schools, new/replacement buildings.

Perhaps the biggest loser was health. Few significant announcements appear to have been made. I was wondering if there might be money for upgrading hospitals and a modest top up of the District Health Boards following issues in recent years around funding calculations.

There was a very welcome investment of N.Z.$1 billion for railways, as an acknowledgement of the significant but under appreciated role that they play in our economy. Hopefully it will lead to Kiwi Rail better utilizing the South Island track network, which could easily allow more freight to go on rails instead of via road.

National and A.C.T. invariably cried foul on the apparent lack of regard paid by the budget to the economy. This demonstrates to me that they clearly have not latched in any way onto the fact that from Day 1 this Government has said that it will have a stronger focus on the well being of people. It is an attempt to provide redress for the socio-economic consequences of National’s market driven  philosophy. From those with family in mental health institutions, to those struggling to get their children through school and retirees concerned about being left behind in the digital era, this Budget appears to try to address their needs.

On a cautionary note though, the budget, whilst nice for those in income poverty and having issues with mental health, does raise – again – questions about the wisdom of removing the Capital Gains Tax from the table. Going into election year with National and A.C.T. nipping on Labour’s heals, the money taken from a C.G.T. would have gone some distance ensuring New Zealand’s debt does not get too big.

 

What I hope for from New Zealand Fiscal Budget 2019


Whilst the Government struggles to contain the effects of National’s claimed leakage of figures from today’s Fiscal Budget, I give my take on what should be in Budget 2019. This is not a complete list, but a priority one based on what I believe has been a significant and sustained under funding of programmes and support for the very young and the very old, the mentally unwell and those in the education system who are not in a position to fund their own expenses.

I am not expecting much, if anything new, for education today. I believe Minister of Education Chris Hipkins when he says that he cannot offer teachers all that they are asking for. A lot of the demands are things that are built up with time and need refining as they go – it is not a simple case of saying “here’s the money, it is all ready to go”.

The same goes for Defence. Earlier announcements might get a top up such as the P8 Poseidon patrol aircraft acquisition. However I am not expecting Minister of Defence Ron Mark to announce much if anything new.

Where I am expecting to see some additional support are:

  • Non monetary: Moves by Treasury to implement some of the recommendations made by the Tax Working Group in their review, which came out earlier this year. For the Government to improve its revenue, changes need to be implemented fairly rapidly
  • Non monetary: Investigation into Pigouvian tax being used to dissuade persistent polluters by taxing them if more than x is discharged per business year
  • Non monetary: Lower the range of housing prices for Kiwi Build houses – the current range is unrealistic
  • Mental health: the Government has announced it will accept nearly all of the recommendations that were made in the mental health inquiry, except – notably – the one for a suicide reduction target and one other; given the problems being had with mental health patients in hospitals, the explosion of problems among youth ranging from effects of bullying, societal pressure and domestic situations; support for mens mental health
  • Health: a top up for D.H.B.’s to help maintain services
  • Disability sector: frankly an abomination in terms of how it is being treated, where lip service is everything and solid accountable actions are nothing, a top up across the board for all such
  • Social Development: particularly those with school age children who might be struggling to afford the basics and may need assistance purchasing school materials, uniform parts or funding school trips; assistance for superrannuitants including perhaps further discounts on essentials
  • Tertiary Education: Introduction of a postgraduate allowance for all Honours, Masters and PhD students recognizing that it is impossible to expect such students to hold down full time work and complete qualifications that are time and energy intensive

Secondary priorities that I think need be provided for include:

  • investment in railways particularly in the South Island, Hawkes Bay and Gisborne.
  • reinvestment in science with some emphasis on explaining theory to students.  waste reduction, reducing crime, and simplification of the research grant application process for researchers
  • encouraging reduction in harmful carbon emissions by recycling aluminium; introducing hempcrete; investigating the feasibility of waste to energy

There could be more, but when the Government walked away from the C.G.T. it walked away from a significant opportunity to check the unsustainable growth of the wealth and income of the 1% who have 50% of all of the known wealth. In doing so it deprived New Zealand of a substantial source of tax revenue that will now probably not happen for another generation – if ever.

The cautious budget


Treasurer Grant Robertson delivered the first Fiscal Budget of the Labour-New Zealand First-Green Government yesterday. Whilst disappointing Labour supporters and National supporters alike, the Budget kept a promise to exercise due fiscal restraint, acknowledging the poor international economic climate, the impact of the Christchurch and Kaikoura earthquakes.

Thre was little presented in the 2018 Fiscal Budget that New Zealanders had not already been made aware of. A number of reasons exist for this:

  • The Government, as is often the case, had already outlined what it considered to be the major announcements
  • Prior to being elected, the Government had announced that it would establish a set of fiscal responsibility rules that woul ensure that the three parties acted in a cohesive yet responsible way
  • The first budget is normally the most cautious as the incumbent government wants to establish its credentials, particularly if its image has been damaged by Opposition claims

One the major announcements made was that Conservation would get  $138 million for pest control. Money was also allocated to schools, to help fill in gaps left by the previous government, though teachers signalled their considerable discontent, with one principal going so far as to say that he would not his teaching staff walking if they thought the budget insufficient. Perhaps the biggest cheer went to Health.