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.

 

N.Z. in lock down: DAY 36


Yesterday was DAY 36 of New Zealand in lock down as we fight the COVID19 pandemic.

But the economic environment that we need to move into post-COVID19 is not the old unsustainable, throw-away, biota demolishing monster of old. Not if the human world is to avoid early demise caused by inane decisions being made by powerful forces in spite of all the technology, all the knowledge and know how to the contrary. No. If the human world is to continue to grow and enhance itself the human’s that make that world possible much change.

Everything is there, except the political willpower to make that change. But it does not need to be like that.

The change I envisage is something that is not at all new in terms of what I espouse. I have long been a fan of green technology and know how. Whether it is hempcrete to replace concrete because the latter has a massive carbon footprint; the development of hydrogen as a fuel source for vehicles; the extraction of gold, palladium and other valuable metals from e-waste for re-use, the future is green technology.

But it is not just technology, though sustained investment in that will be very useful. The economic recovery will need projects that can be started quickly and get lots of people back to work in a meaningful way. One such thing would be a complete overhaul of the insulation in New Zealand’s social housing stock, which would create a trade boom. The number of houses ready for use in that inventory is nowhere near adequate and so there is a need for new housing projects – Christchurch has an abandoned saleyard at Addington which have not been used for decades; and could accommodate dozens of one/two/three bedroom dwellings quite easily.

There are large scale planting projects that could be getting underway to replant poor quality land that is not practical for farming, building or grazing. To that end I support the Green Party request for $1 billion, which it proposes to use for a range of community funded initiatives. Native forests are very effective carbon sinks and suck up huge quantities, but without intervention to stop possums and other animals from destroying new plantings and stripping foliage, they might become net carbon emitters.

Some projects will be longer term and are quite ambitious. Which is why it is interesting to note the Green Party also has a plan for a $9 billion investment in the New Zealand railway network. In line with New Zealand’s commitment to dealing with climate change, the Greens intend to promote railways as an alternative to the heavy investment in motorways. New Zealand has 1,067mm track gauges, which are similar to some used in Japan for fast trains that can reach speeds of 160km/h. Whilst expensive, the speed of the trains would enable people and goods to reach places nearly twice as fast as a vehicle obeying the 100km/h speed limit.

But as I said at the start, this all comes down to will power. The money is there – the Government has an unprecedented license to spend at the moment. The projects are there and some are shovel ready, whilst others are probably no further than back of the envelope calculations that look promising, and still more are ones that should have been done yonks ago.

So, who is going to give the go-ahead for these projects to get started and get New Zealand back to work?

 

 

N.Z. in lock down: DAY 29


Yesterday was DAY 29 of New Zealand in lock down as we try to fight the COVID19 pandemic.

One of the most constant – and least surprising – conversations that is being had is about the effect of the lock down on the economy.

As a Christchurch lad who witnessed the devastation of the 04 September 2010 earthquake, along with the February 2011 and June 2011 aftershocks, I think I have an idea of what could constitute grim times. It is certainly true that the pandemic has not physically destroyed any buildings, but the number of businesses closing around Christchurch, the jarring uncertainty about whether they will reopen, the massive job losses that are occurring, certainly have brought on a feeling of deja vu about it all.

I have huge sympathy for the many many people who have lost jobs, who do not know if they will have a job to go back to when most of New Zealand goes back to work. I know that the socio-economic toll grows the longer we keep the country in lock down and I agree that we cannot stay in it forever.

But that is where the doom and gloom ends. I am optimistic about New Zealand coming thundering back from all of this. Will it happen overnight? No, but with no past experience on shutting a country down and restarting it again, it was never going to happen overnight.

I am optimistic because there is a massive, almost unparalleled opportunity for an economic revolution right now in New Zealand. Earlier this year I wrote consecutive blog articles about why neoliberalism is a massive, abject failure here and why we need to be rid of it. Here now is that perfect opportunity to do exactly that. But not only is there a unique opportunity to get rid of an economic model that has failed the vast majority of New Zealand, the potential model that could go in its place is even more thrilling.

So what is that model that could replace the failed neoliberal experiment?

The model I am calling for is a massive investment in skilled trades; niche industries backed by a complete overhaul of the New Zealand no. 8 wire model of research. It will be green, it will be designed by New Zealanders and it will work for New Zealand and New Zealanders.

We have hundreds of tradies in bad need of a steady work stream. One thing that could sort a significant number of them out is refurbishing all of the state house inventory so that they have 21st century standards of warmth and dryness. This will indirectly partially pay for itself by helping reduce the problems many New Zealanders have around asthma and other respiratory ailments.

Another one is seismic retrofitting large buildings in high seismic risk areas with shock absorbers so that the buildings can sway backwards and forth, whilst the absorbers take the seismic energy. With hundreds of buildings in the South and North Island in urgent need of this and no idea how long before the next big earthquake hits, this is a priority we should take note of.

But it is not just singular buildings or jobs for a couple of people per site that we need. New Zealand is critically behind on infrastructure. We need a comprehensive overhaul of our railway system; we could be building a hydrogen plant and investing in that instead of fossil fuel; maybe a hemp crete research facility to help cut the carbon emissions of the concrete industry, which I understand puts out about 8% of total carbon emissions.

Much of the knowledge for these ideas is already there. But is the political willpower to do something truly radical?

You tell me.

 

 

N.Z. in lock down: DAY 17


Yesterday was DAY 17 of New Zealand in lock down as we try to fight the COVID19 pandemic.

In the coming few days, once the Government resumes working following the Easter staycation, the plan for how to manage New Zealand coming off LEVEL 4 will be released.

I expect that there will be some holes in the plan. No one should be surprised as this is the first time New Zealand has been locked down and then made to start from cold. Logistically it will be a major feat in itself. Many nations overseas will be watching to see how we go.

To me it will be like turning on a power station after it has been turned off for a long time. It is not simple case of simply flicking a couple of switches so that the fuel or water that is used to generate electricity simply starts flowing into the turbine and setting the generator in motion. After four weeks the system will need to be primed. The technicians will not be able to bring it up to full capacity immediately and other triggers.

In the same sense, businesses will not be able to immediately open because they will need to figure out how many staff to recall and when; get stock in if they need to; establish which functions of their operation are going to be operating and which ones will have to wait longer, and so on. Further up the supply chain, the suppliers will need to figure out how to get their systems and functions going again. And then there are the staff, who will have to get their lock down lives in order – arrange who will look after dependents, such as elderly relatives, children or anyone else they were looking after.

There will be some to-ing and fro-ing between Government and businesses as the latter seek clarity about what they can and cannot do. After a successful lock down period no one will be rushing to do anything that might risk undoing all of what was achieved by spending four weeks to shut down COVID19.

And with the reopening of businesses I expect as I wrote on Saturday, that the rules around hygiene will have changed. Even if bars, restaurants, cafes, and such cannot open their face-to-face functions immediately, any forward looking owner/manager would have given thought about how they can reduce the risk to staff and patrons alike.

The operating environment that businesses find themselves will have changed dramatically in four weeks. Whilst their functions will be essentially the same in many ways, the realisation that a biological menace like COVID19 can cripple the country will be the long over impetus to undertake programmes of building resilience – something that should have happened after events like the Christchurch/Canterbury earthquakes, which whilst being geological rather than biological provided a severe local test.

Businesses open with a business as usual approach I suspect will be the most vulnerable. They will probably be the first to go to the wall should we have some kind of relapse.

This will take time. It will take patience and some hiccups are inevitable. We survived the Christchurch and Canterbury earthquakes with the many problems that arose out of them, some of which still exist today. To think that COVID19’s mark on New Zealand will disappear overnight is straight out fantasy. I suspect even if the rest of the 2020’s is relatively painless, the economic recovery and the socio-economic rebuilding of our society will probably still be casting a shadow of some kind in December 2029.

But if you think we can do better and know how, show me. Show New Zealand. Show the world.

N.Z. in lock down: DAY 14


Yesterday was DAY 14 of New Zealand in lock down as we try to fight the COVID19 pandemic.

In the last few weeks, hundreds of thousands of New Zealanders have seen their jobs get put on ice as their employers brace for what might be the single biggest economic hit to the country since before 1987. Estimates have been made that 400,000-500,000 New Zealanders might lose their jobs as a result of the COVID19 pandemic.

Whilst the vast majority of employers are trying to protect their staff from the impact as much s they can, there are a few employers whose methods have attracted negative media attention. Fletcher Building, which has had several turbulent years as a result of mismanaging a host of projects and finding its balance sheet to be a sea of red, is one of two employers I want to look at a bit more closely in this article. The other is Sky City.

Fletcher Building has asked its 9,000 staff to take a staggered pay cut, of which 8,600 staff agreed to. Its senior staff were initially going to take a 15% cut and then raised it to 30% when it was realized how much impact was being felt by other staff. Concerns were raised that there would be hardship issues for staff who live from pay check to pay check. The workers union E tu believes the conduct to be unlawful and indicated it would be reporting Fletcher Building to the Ministry of Business Innovation and Enterprise.

Sky City has come to my attention after reading a Stuff article, where a lady working as a food and beverage manager and union leader describes how she has in effect been fired. Julia Liu talked about a letter that had been sent to staff that ruled out any discussions, any exploration of alternatives. In her case a 21 year career was being brought to a close. The letter, according to Unite Union National Secretary effectively told the staff that they are fired. Ms Liu said no effort had been made by Sky City to apply for a wage subsidy to assist employees.

In this case another article suggests that Sky City actually is assisting staff to find new jobs and that the company did apply for the wage subsidy.

These are tough times and the speed of the onset of the lock down had to be fast in order to start slowing down COVID19. However I believe that the warning signs were around for a bit longer than either employer have indicated and that as a result, had they been better organized they could have talked to staff in greater depth.