One Question Quiz
The Labour/Greens coalition campaigned on bringing in the Budget Responsibility Rules. (Photo: Getty).
The Labour/Greens coalition campaigned on bringing in the Budget Responsibility Rules. (Photo: Getty).

Budget 2018May 17, 2018

Budget 2018: the great Spinoff hot-take fry-up

The Labour/Greens coalition campaigned on bringing in the Budget Responsibility Rules. (Photo: Getty).
The Labour/Greens coalition campaigned on bringing in the Budget Responsibility Rules. (Photo: Getty).

Grant Robertson has completed his first big test as finance minister in publishing the 2018 budget. How did he fare? We asked experts from across a range of sectors to give us their verdict.

Read analysis from our business editor, Rebecca Stevenson, here, and from Grant Thornton director Greg Thompson here.

Healthcare back on track, more to be done on keeping us healthy

Dr Sudhvir Singh, policy director, EAT

With glaring problems in healthcare facilities and a disgruntled workforce, health was always going to be a fundamental test of this government. Restoring and “fixing up” the basics like Middlemore and Dunedin Hospitals, support for midwives, and better access to primary care, are the minimum expectation voters have – and here the government has delivered.

This $3.2 billion dollar investment in healthcare over four years is a thumping injection. Whilst the additional support for the ‘health system’ is welcomed, the long term health of New Zealanders requires strengthening of ‘systems for health’ beyond hospitals and GP clinics as well. Record numbers of New Zealanders are becoming sick from obesity and associated conditions like diabetes and heart disease, which are already the biggest causes of preventable illness and death in our society. Without addressing the root causes of these diseases – such as inactivity and unhealthy diets – they will continue to drag health system spending into an ever greater proportion of the government’s overall spend.

The transformative approach to healthier and more sustainable cities through new strategies for transport and housing needs to be seen as a win for population health as much as any of the welcomed increases in vote health. The biggest remaining gap is the lack of fiscal and regulatory measures to help ensure healthy food options are affordable and attractive to New Zealanders, particularly in our poorest communities.

A lot of money goes a short distance in housing

Leonie Freeman – Housing Strategist

Housing is clearly identified as a key priority by the government and announcements to date have supported that.  This has included the Kiwibuild programme – 100,000 affordable houses in 10 years and a $2bn allocation. Plus the more recent announcement of the $100m, of which $67m is to support existing collective impact Housing First initiatives underway to end homelessness.

This was expanded in today’s budget to firm up numbers for additional social houses. It has allocated $234m for 6,400 new social houses over four years, or 1,600 per year. It has allowed Housing New Zealand to borrow funds to deliver this outcome – otherwise $234m divided by the price of a $600k house delivers only 390 houses.  The other issue to note is that to deliver an additional 1,600 houses per year, over 2,000 will need to be built as some will be demolished.

The government has created some big, brave and bold aspirational targets. The key question, however, is the how. Housing is a high budgetary priority, but this alone will not ensure the desired outcomes the government is seeking. Even with this much money it doesn’t mean the other constraints go away – such as who will build them, how are the housing developments funded, use of foreign investment, how do we build more affordable housing, how can we reduce timeframes and consenting costs, the capacity and capability of the construction industry, and the list goes on. There needs to be clarity and detail on how true partnerships will be created with groups such as the private sector developers, community housing sector and iwi.

The government together with all parts of the property sector need to be smart about how the money is spent and ensure it achieves the maximum results. Although $2bn seems a large amount of money, it only builds just over 3,600 new houses at an average of $550,000. If we don’t identify and resolve many of the constraints to genuinely build more affordable housing, and this money is used to subsidise housing, it will only create 20,000 new affordable houses (if subsidised at an average of $100,000).

Taking care of business

Kirk Hope, chief executive of BusinessNZ

Some of the big ticket items in the budget will support business growth like the investment in Auckland transport infrastructure, the Provincial Growth Fund, Green Investment Fund and R&D tax credits. More funding for Foreign Affairs & Trade will help NZ businesses exporting overseas.  While the Budget won’t bring transformational change to the economy, it does stay within fiscal limits and does allocate useful funding towards business growth.

Too little too late for education

Stephen Lethbridge, principal Pt Chevalier School

There is one certainty when it comes to budget announcements around education: no matter what the allocation, we will always need more! We have faced some very lean years, and have seen the major decline of funding in the area of learning support for those in most need. $133.5 million over four years will help to address the significant issues around adequately catering for these children. If this translates into more support staff, more therapists and educational psychologists then our schools will benefit. My worry is that it’s difficult to find those people now, vacancies exist and are hard to fill.

A 1.6% increase to operations grants is welcomed. It is at least greater than the rate of inflation, which may seem small but if we combine this with the additional learning support package it means that schools will now have more money to use on supporting learning for all students. Schools have long used operations grant money to top up learning support hours. Additional spending on school property and extra classrooms is appreciated, but this is just a necessity to keep up with demand of roll growth.

1500 new teachers! Oh how we need them. It is increasingly more difficult to find relief teachers and staff for roll growth classrooms. The challenge is finding 1500 teachers at a time when the profession is overworked and treated as a political football. Current contract negotiations will not only  have a massive impact on getting people into the profession, but it may tempt some of our amazing teachers back after leaving.

Māori and the government aren’t speaking the same language

Joshua Hitchcock, writer on Māori law, policy and economic development.

The fear amongst iwi was that this would be a government that did not want to engage on a Rangatira ki Rangatira level. The initial engagements with the Iwi Leaders Forum and comments from government ministers gave credence to this fear. Budget 2018 confirms it. Te Puni Kokiri has had its funding cut by $12 million, a 3.7% drop from last year. Alongside this, there was a noticeable absence of specific initiatives designed for Māori in Budget 2018.

In many respects, this is not a transformational budget. Business as usual for the proponents of incremental change. For Māori, it signals a sea change in approach. Crown-Māori relations bypasses iwi and goes straight to the people. Increased funding for social services, investment through the provincial growth fund; indications of a Government determined to deliver social improvement not alongside the advancement of Māori rights, but instead of it. Time will tell if this is the best approach.

A start, but much more needed for vulnerable women

Jackie Clarke, The Aunties

When I read over the outlines and headlines and press releases of the measures being undertaken by this government in their first budget, I instantly understood what it was. A beginning. Getting services back up to where they were when National came in 10 years ago. And in my field of expertise, restoring funding to services that had been starved of that funding for the past 10 years at worst, and funding that had remained static at best.

In terms of domestic violence, this budget is simply restoring funding that was taken away from those primary service providers 10 years ago. The increase in demand for refuge services has increased dramatically – it’s my belief that as well as an increase in family violence, it’s linked to a shortage of suitable accommodation for women who are leaving violent relationships. Women’s refuges have, in my opinion, become emergency housing providers as well as providing safety for women and their children, and programmes that help them to live violence free lives. With the provision for more housing and more emergency housing in this budget, it is my hope that women’s refuge can get back to providing their core services.

Teachers left out in the cold

Perry Rush, Principal Hastings Intermediate

Disappointing! Education has been through a cold winter and I was hoping for a decent thaw. Where is the funding to make teaching a better paid profession, the provisions to attract more teachers to ease the chronic shortages, and the staffing assistance to ease the pressure of high behaviour and learning support needs? I expected more.

New money no cure for old pain for Māori

Dr Hirini Kaa, lecturer in the School of Humanities at the University of Auckland

This budget is Māori coming up gasping for breath. But the old weights that were tied firmly around our feet are still there, waiting to pull us back down. Some of this budget is crucial buoyancy. The Prime Minister’s visit to the North was a powerful beginning for this government, and the Provincial Growth Fund addresses the promises made in the North and puts kai on the table in Te Tairawhiti and other areas of immense need. Injections of funding for health, housing, welfare and education is going to help address the presenting crises for Māori, even though it retains some of the stigma around beneficiaries in spite of claims of manaakitanga.

Regardless, the old weights of colonisation remain, however rusted they may be. $300m in extra funding for police comes regardless of the police policy to reduce “unconscious bias” (racism) not working so far – and the impacts will be felt hard in our communities. The Waikeria mega-prison could still go ahead as New Zealand’s latest living statue to colonisation.

The government’s innovation in the form of the Māori Crown relations portfolio is a nod towards the Waitangi Tribunal’s magnum opus report Wai262 Ko Aotearoa Tenei and fulfilling the potential of Te Tiriti o Waitangi post settlement. However it is just that: a nod. The risk is this innovation becomes a messaging exercise to keep the Māori seats in thrall. And there is noticeably no significant mention of Whānau Ora, the Māori Party-led experiment in cutting those weights away. As noted, this is a problem as old as New Zealand. Once in power, governments of all stripes believe ideologically in the power of the State. And in Māori experience, that State has been weight.

Everyone was the winner on the day

Scotty Stevenson,  senior sports reporter, The Spinoff

In short, it was business as usual for the current sports funding model in New Zealand, which came as no surprise (nor as a disappointment) to those within the high performance sector, who are comfortable that current funding levels will take them through to the end of the next Olympic cycle in Tokyo.

High Performance funding sits at approximately $70 million per annum, while close to $20 million per annum supports the wider sport sector – participation, grassroots, and community health and wellbeing through sport and recreation. An additional $45 million per annum in grants from the Lotteries Commission (which has increased profits this year) is accessed each year for similar initiatives.

Expect lobbying in the coming months as administrators plan for the post-Tokyo Olympic cycle, and perhaps seek additional funding to expand both the high performance and community programmes. In the meantime, you can call this one a draw.

Why aren’t the poor more of a priority?

Susan St John, associate professor economics, University of Auckland

Let’s be clear, the family poverty inherited from the last decade of entrenched poor policies, sheer neglect or deliberate attacks on living standards won’t be fixed overnight.

The budget delivers much to applaud: better access for low income families to primary healthcare; housing; social services, and critical infrastructure. But does it really show a grasp of the enormity of the income and wealth gaps?

Grant Robertson talked of surpluses and debt reduction to future proof the economy for future shocks. We have a massive social shock of unsustainably low incomes that needs urgent attention. An earthquake might dislocate society in an instant, but this social shock has crept up on us with nonetheless comparable significant and disruptive effects.

The budget speech insists: “Our economy must be more inclusive, too. This means a society where everyone has an equal chance to fulfil their potential, to contribute, and to live meaningful, connected, healthy and fulfilling lives”.

The 140,000 children that live in families under the very lowest of poverty lines need inclusion. They will be helped only marginally in July’s families package. These families can’t wait for tax and welfare working groups to report next year.

The boy band budget – safe and popular (and the best metaphor of the day)

Oscar Kightley, artist

If budgets were boy bands this one would be the Backstreet Boys. Nothing too flashy or offensive, but the basics were enough to keep most people happy. They couldn’t go too crazy or the people who will always believe they’re useless with money would have really lost their minds. Solid cover drive for a safe four.

This must be the last budget where climate change isn’t a top priority

Catherine Leining, policy fellow at Motu Economic and Public Policy Research

When it comes to the climate change portfolio, Budget 2018 feels like the calm before the storm. It focuses more on policy processes for future action than catalysing action now. Budget allocations will support development of international carbon markets (key to helping New Zealand meet its 2030 target under the Paris Agreement), the Zero Carbon Act, the Climate Change Commission, and amendments to the New Zealand Emissions Trading Scheme (NZ ETS).

The major new initiative is a $100 million Green Investment Fund to help reduce carbon emissions. This has exciting potential if it is integrated effectively into existing institutional and financial frameworks and leverages substantial private-sector investment in priority areas. Given the scale of our low-emission investment needs, $100 million won’t carry New Zealand very far on its own. Other climate-relevant budget initiatives include the Billion Trees Programme, the Sustainable Farming Fund, and Auckland’s City Rail Link.

More seeds for low-emission transformation could be buried in the budget’s depths if we had an effective emission price and overarching low-emissions investment strategy for New Zealand. These would bring climate action into mainstream investments in homes, schools, hospitals and key infrastructure as well as regional economic development. The Provincial Growth Fund is much larger than the Green Investment Fund and both should be gateways to a thriving low-emission national economy.

Laying the policy and institutional groundwork for climate action is essential. But future budgets will not be able to avoid supporting serious action to bridge New Zealand’s looming gap to meet its 2030 Paris target and prepare for the impacts of climate change.

Some conservative wiggle room

Eric Crampton, the NZ Initiative

Labour would have been under a fair bit of pressure from its supporters to spend-up more than they have. It is to their credit that they have left themselves some room. Revenue forecasts look very good but depend on economic growth meeting the more optimistic revised forecasts for overall economic growth. Spending growth seems to mesh with the expected increases in revenue, but there are all kinds of looming potential cost blow-outs in compensation for Canterbury earthquake claims, fire-foam clean-up, mycoplasma bovis compensation, and public-sector wage settlements. Some room in the accounts is appropriate.

Two of the most interesting budget announcements were barely budget line-items at all. Minister Shaw announced the government will be investigating a new independent fiscal watchdog to provide neutral election campaign policy costings. Economists around the country will breathe a sigh of relief that they will not have to be scrambling over government accounts in response to hurried phone-calls from journalists asking whether or not there is a hole in any party’s campaign promises. But more importantly, Minister Robertson signalled that the government is investigating better ways of financing the infrastructure necessary for urban growth. Sure, government could borrow more now for infrastructure to solve some of the current problem – and government is indeed going to be spending a lot on infrastructure. But working out better financing mechanisms that make it easy for the beneficiaries of infrastructure to pay for that infrastructure will help make sure that housing is affordable over the much longer term.

The long cold winter for education continues

Adele Hall, ECE senior teacher

The ECE sector has had a funding freeze for almost a decade and it is taking its toll on the profession in many ways, at least for teachers and young children. The biggest disappointment today though was that the funding for 100% qualified teachers was not reinstated.

For our centre, today’s announcement doesn’t change much at all. We will continue to staff our centre with 100% qualified teachers and overall staffing levels above the regulated ratio. We will continue to invest in our teachers, children and their families. We will continue to come up with creative budget ideas including endless fundraising to meet our ever increasing operational costs and do our best to protect the families in our centre from big increases to their contributions.

The small increase in funding will however pay our annual power bill – and for that I am grateful.

RNZ+, minus $23 million

Duncan Greive, managing editor, The Spinoff

Last September the beleaguered media industry received its best news in at least a decade, with Labour’s announcement of a $38m annual funding boost. The detail was murky yet tantalising – some would go to a beefed up RNZ, possibly including a new TV channel, definitely including a lot more online content. There was also a commitment to “investigate ways to support” investigative journalism “across all media platforms” – including a specific reference to “print media”.

In the intervening nine months, things have gone south fast. The aftermath of a semi-clandestine meeting between minister Clare Curran and RNZ’s Carol Hirschfeld, culminating in the latter’s resignation, strained relations between the broadcaster and the government. NZ on Air asserted an interest in how that extra money would be allocated. And the ministerial advisory group set up to divide up that $38m seemed to stretch it further from anyone’s reach.

Today: worse news again. “Quality New Zealand programming and journalism are crucial to our national identity,” says the press release. And yet it earmarks just $15m extra – less than half what was promised pre-election. RNZ’s comment summed up the air of dashed promise: “While we have yet to receive detail of RNZ’s share of the funding,” said chief executive Paul Thompson expectantly, “we are preparing our plans to ensure the public benefit from any increase.” For private media, whatever is left over is hardly worth getting excited about at all.

A small ration for science when there are lots of mouths to feed

Nicola Gaston, associate professor, Department of Physics, The University of Auckland; co-director, The MacDiarmid Institute 

This year’s budget reminds me of nothing as much as Sir Paul Callaghan, seven or eight years ago, standing up in a room full of scientists and asking us to calculate how many hip replacement operations could be funded by the sums of public money invested in our research. It’s a sobering calculation for any of us, but also a really good reminder for scientists to respect other calls on the public purse than just to advocate for direct research funding.

In that spirit, I would acknowledge that while science and research are not big winners in this budget – for example, the targeted increase to 2% of GDP in science funding to match the OECD average has been previously signalled (and we aren’t there yet!) – there are elements, such as the increased conservation spend at DOC and the Green Investment Fund, that will impact on environmental science and related technologies. The second of those is promising for organisations such as the MacDiarmid Institute, given the number of our researchers whose work is relevant to low-energy or sustainable technologies.

For research organisations such as ours who operate in part at the science end of business, the R&D tax credit is one of the biggest changes.  It doesn’t impact on our scientists directly so much as the companies we work with, but that has very direct relevance to the ways in which we are able to build value for New Zealand, and – most important of all – to the strength of the industries that employ our graduates, many of whom will be looking for R&D roles in New Zealand companies. So it is definitely one of the elements of this budget that will most bear watching, in particular as we seek to understand the extent to which these new incentives for industry research operate differently to the previous Growth Grant mechanism administered by Callaghan Innovation.

A copy of Budget 2018 on display during (Photo by Hagen Hopkins/Getty Images)

A small shift towards saving the planet

Sidd Mehta, Generation Zero

Unlike budgets seen in the past two decades, this budget makes significant mention of the most pressing issue facing humanity today. Climate change. This acknowledgment, in the context of a central government budget and the funding allocated to face this challenge, is a welcome shift from two decades of political inaction, frittering about the edges of the problem, and shifting responsibilities. The success measure of this intent is when the whole of parliament comes together to work towards the necessary and vital solutions for a climate safe Aotearoa.

The announcement of the Green Investment Fund, which is a critical step in ensuring a just transition from fossil fuel jobs, is also a good start. The funding mechanism will enable new low carbon industries to develop and create new jobs that will be truly resilient against the challenge Aotearoa faces with climate change. The science is clear, emissions have to reduce, but that does not have to come at the cost of livelihoods and wellbeing. We want to see the affected communities being enabled to lead on the allocation of the investments. The local knowledge, expertise, skill, and passion of the people and communities will drive the success of this initiative, and by extension, the intent of the budget.

Ultimately though, this budget is only a small step in the bigger journey we must all embark on together. We hope that the next budget can build from this one, and take the larger steps needed.

A well deserved (but small) funding injection for local musicians

Ben Howe, Massey University/Flying Nun Records

Overshadowed by the NZ on Air/RNZ $15 million, two small but notable announcements for music and the arts have slipped in under the radar. An additional $2.6 million funding (over four years) to the New Zealand Music Commission and the reintroduction of the Pathway to Arts and Cultural Employment (PACE) scheme.

The Music Commission increase is well deserved. Its Outward Sound scheme punches well above its weight. It has contributed to the global success of numerous local artists; Ladyhawke, Nadia Reid,  Aldous Harding, Broods, Fazerdaze, Yumi Zouma, Marlon Williams, Fat Freddy’s Drop, Brooke Fraser and many more. Despite unprecedented international successes, the scheme has operated on peanuts compared to other arts agencies.

Until now, Outward Sound has had approximately $400k per year in music export grants to distribute. This amount is paltry when compared to the $14 million for the NZ Symphony Orchestra (this was increased $1.2 million p.a. in 2016 under National). Despite this massive disparity, I would argue the Outward Sound funded artists – so many of whom are excelling on the world stage – provide more significant cultural and economic benefits to our country.

The Music Commission has managed to do a lot with very little, so I expect they will make every new dollar count.

The restart of the PACE scheme is an interesting announcement. Introduced by the last Labour Government, then subsequently phased out by National, former recipients include Taika Waititi and members of The Phoenix Foundation. I think the reintroduction is a positive acknowledgement; creators of art and culture bring considerable value and they need to be nurtured.

An investment in the long term health of New Zealand

Dr Boyd Swinburn, professor of population, nutrition and global health, University of Auckland

This is a very good budget for health but not in the way that most people would think. Yes, it is true that the DHBs and other health services have received a much-needed boost in funding but this is largely catch-up after years of neglect. But the real health gains in the long term will come from the budget items in other portfolios.

Reducing child poverty, improving housing, strengthening early education, more equitable wealth distribution through the Families Package, and stimulating the regional economies will all have important health pay-offs in the long term. This is addressing the underlying determinants of health, and the government is to be applauded for their long-term vision and seeking solutions beneath the surface.

The major budget gap in terms of specific prevention policies is anything to directly tackle poor nutrition, which is by far the biggest cause of preventable death and disability; no health levies on sugary drinks, no added support for healthy food in schools, and no return to the investment in healthy communities of a decade ago. Still, for seriously targeting the deeper determinants of health and restoring health services, this budget gets an A.

Repairing a health system under pressure

Robin Gauld, dean, University of Otago Business School

As with any incoming government, when it comes to health this budget has been presented in a context of considerable pressures. The prior National-led government focused efforts on tightening efficiency within the health system, along with quality, and also expected DHBs to work more collaboratively as they were widely viewed as working in isolation from one another. Its budgets constrained health spending somewhat.

The Labour-led government claims to have inherited an underfunded system, and there seems to be considerable support for this. As such, they have produced a ‘straight-bat’ budget aimed at injecting more funding into health. The various areas of focus will be welcomed by recipients; DHBs, those eligible for cheaper GP visits, midwives and so forth. The capital development funding is important, as evidenced by the problems facing Counties Manukau. Reductions in Pharmac’s budget are a potential concern. The small pocket for primary care is useful, but a plan for how this will be spent is needed. Primary care remains a highly-complex landscape. The Ministry should be charged with sorting out everything from funding for primary care and GPs through to how the sector is organised.

One area that might have been given more emphasis is the health system itself. I’d like to have seen an innovation and change fund. We have so many wonderful initiatives developed across the health system but the only way one DHB or PHO learns is through word of mouth. There is no national clearing house, or any particular reason why a DHB would try to improve services delivery other than to cut costs. New Zealand is fast lagging behind developed countries in the lack of concerted effort in this regard.

Stop subsidising agriculture and invest in the places that need it most

Russel Norman, head of Greenpeace NZ

There are some good things in this Budget for the environment: the Green Investment Fund, the investment in sustainable transport, the increase in DoC funding, a bit for home insulation, a bit for RMA oversight. And no doubt some others. They will help nudge things in the right direction.

But here’s the rub. The biggest climate polluter in the country is the agricultural sector, with about half of our emissions. And the biggest single spend on a climate programme in the budget is the $800 million a year on agriculture’s climate emissions. But this $800 million a year doesn’t go to reduce agriculture emissions, it goes to subsidise them under the Emissions Trading Scheme. Instead of delivering a price signal to the agriculture sector to cut its emissions, we spend $800 million a year to ensure that agriculture pays a price of zero dollars per tonne of emissions. The effect of this massive subsidy is that we have more cows, more emissions and more water pollution.

The first rule of good fiscal and economic policy is to stop subsidising stuff you want less of. The elimination of the irrigation subsidies freed up around $400 million that could be spent on good things instead of being spent on increasing cow numbers and water pollution. It’s time we took the knife to the $800 million per year we are spending to increase agricultural greenhouse emissions, and spend the money on things we really need more of, like public health and education and environmental protection.

A boost for defence but the truly big decisions await

David Capie, associate professor in international relations, Victoria University

Few people expected the 2018 Budget to be a ‘transformational’ one for Defence. Defence Minister Ron Mark had campaigned on increasing defence spending to 2% of GDP, but given Finance Minister Grant Robertson had already signalled that social spending was going to be his top priority, that was never remotely likely. In the end, Mr Mark managed to deliver an increase, but nothing like the billion dollar boost his New Zealand First leader Winston Peters produced for the Ministry of Foreign Affairs and Trade.

Budget 2018 allocates an extra $367 million for Defence and Veteran’s Affairs over the next four years. This includes $324m for operating expenses and $41m of new capital spending, most of which will go to upgrading the Defence Estate, otherwise known as its collection of deteriorating bases and facilities. Given the bases upgrade was forecast to cost $1.7 billion it’s a pretty modest start. The government will also expand its Limited Service Volunteer “boot camp” scheme for young people.

Delving into the estimates reveals some intriguing details. The allocations for “military operations in support of a rules-based order” and “operations contributing to New Zealand’s security, stability and interests” both drop from around $52m each in 2017-18 to around $39m over the next financial year. Whether those numbers reflect an anticipated draw down from operations in the Middle East remains to be seen.

The biggest financial issue for Defence is not one found in this year’s budget but rather a decision looming just a few weeks away. The last government’s $20 billion modernisation programme for the NZDF included replacements for the six ageing P3 Orions. National put off that purchase until after the election and Mr Robertson and Mr Mark have accused them of not funding the modernisation programme.

Defence wants to replace the Orions with four Boeing P-8 Poseidon aircraft. They are highly capable and operated by our closest partners. But they also come with an eye-watering price tag in excess of $2.2 billion. And the clock is ticking. Boeing’s P-8 production line will close soon. The deadline for the government to make a decision has been extended until July, meaning Cabinet will likely face a decision in June. How that plays out will be much more consequential for Defence than anything in today’s budget.

Measuring the wealth of our country

Prof Paul Hansen, Department of Economics, University of Otago

Of course Budgets are intensely political affairs – that’s what makes them so interesting! And so it was with this first Budget delivered by Minister of Finance Grant Robertson on behalf of Labour, NZ First and the Greens (bearing in mind, a ‘mini-Budget’ was delivered in December). Politics is all about balancing competing objectives and appealing to politically relevant, often disparate, constituencies. This Budget delivered considerably more spending on health, education and social welfare. At the same time, impressive budget surpluses are to continue (barring more earthquakes and financial crises – fingers crossed), so that the coalition’s Budget Responsibility Rules are adhered to. (And wasn’t the new government lucky to have inherited such a strong economy, delivering ever-increasing amounts of tax revenue? No wonder National is so grumpy!)

Relatively uncontroversially, a lot of new health spending announced in the Budget appears to be essential to keep the health system going and to stop hospitals from falling down. In addition though, a big theme in the Budget, to my ears at least, is about strengthening the welfare state – intended to rescue the hundreds of thousands of adults and children from poverty. The ideological divide, and the reason we have competing political parties, is about the best way of achieving this important and universal goal. There is no doubt that Mr Robertson and his coalition colleagues are sincere in what they want to achieve. But are they right in the best way of going about it? Time will tell.

Grant Robertson heralded his maiden budget as being a “transformation” budget. Let’s hope it is as far as its beneficiaries are concerned. But there wasn’t much in the budget to transform New Zealand’s poor (per capita) income growth, which depends fundamentally on productivity growth (producing more from our resources) and is the main determinant of people’s material standard of living. Indeed, he announced that his next budget in 2019 will measure our economy’s achievements differently, in terms of other measures of well-being than just GDP. Let’s hope such a widening of the government’s attention does not distract (or absolve) the government and its advisors, such as the Treasury. The main reason people are poor in New Zealand is because they earn so little relative to the cost of living. A ‘strong’ economy, as conveniently measured in per capita GDP terms spread across the population (rather than just the rich), will always be central to how most people enjoy their lives.

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