While today’s budget had some positive and progressive news for society’s most vulnerable, experts say the government is still being cautious when it should be bold.
With the government facing social and economic battles on a number of fronts, today’s budget was something of a buckshot, firing billions of dollars at hundreds of different agencies and programmes. According to Kiwibank chief economist Jarrod Kerr, the government hit the mark with its decision to increase benefits from between $32 and $55 weekly – by far its most courageous, and prudent, announcement.
“I think it was the one major positive from today and obviously, with that wellbeing lens and focus on reducing child poverty, it’s a very positive step,” Kerr said.
“It goes on the advice of the welfare advisory group and it will go some way to solving some of the problems that we have with the most vulnerable in a society. But the most vulnerable still need to be able to find employment, get to employment and have a house to live in, and I don’t think we’re doing enough on that front.”
Kerr said the rest of the budget was cautious, with the government being as conservative as possible in order to secure lower debt and higher revenue in the medium to long term. He said it stood in stark contrast to the Australian budget last week, in which its government announced huge borrowing and spending packages, leveraging low interest rates to stimulate economic growth and target systemic issues.
“I was surprised that they [New Zealand government] were as cautious as they were. They want to show themselves as being fiscally prudent – but it wasn’t an exciting budget. The Australian budget last week was an exciting budget and one that pushed the envelope. It targeted jobs, targeting growth, using this once-in-a-generation opportunity to right the wrongs of the past, whereas we’ve taken a more conservative approach.”
“Many a year we look at budgets and we see a government which is a little too optimistic, whereas this is the opposite. This is a government that’s being cautious. I’d just like it be more front-loaded.”
However, there was still a significant chunk of money announced for infrastructure and operation spends: $3.8 billion more of operational spend, $3.9bn for capital expenditure, along with an additional $11.5bn for infrastructure every year for the next four years. Kerr said that the capital expenditure was less than he’d hoped, but the infrastructure figures were “healthy”.
“We do think they could have done more to push the envelope on this. To sit here and say the Australians needed to do it and we didn’t is wrong.
“We have a lot on our plate; we have to tackle a chronic shortage in housing, we need to tackle child poverty, and like every other country on the planet, we’ve got climate change and ageing demographics to deal with. I think we should be doing more today to tackle those long-term issues.”
According to the government’s forecasts, the new budget will mean debt levels will peak at 48% of GDP by 2027, down from the 55% forecasted last year. Kerr said this pursuit of low debt was not factoring in the nature of current low interest rates, which should allow an economy to borrow while it’s cheap, grow and then pay it back once it is in a stronger economic position.
“The caution around debt is that one day interest rates will rise and you’ll never be able to pay it back. Well, that’s just not backing yourself. All you need is your nominal GDP to be materially higher than your interest rate. We’ve got that already and we should be able to continue that for quite a while.”
Other than increasing benefits, one of the other standout budget announcements was a $380 million targeted housing fund that would create 1,000 new houses for Māori families. Housing advocate Jacqueline Paul said the announcement was heartening as it targeted a chronic issue within the Māori community.
“Many Māori are living in severe housing deprivation and with declining homeownership rates and increasing rates of homelessness. It’s really difficult to see the realities of many whānau struggling to put food on the table and using a high proportion of incomes towards housing costs.
“This investment is so critical to strengthening the Treaty partnership by enabling and funding Māori housing programmes and initiatives directly.”
She added that the announcement to ring fence $350 million for infrastructure to enable housing for Māori from the $3.8 billion Housing Acceleration Fund would enable Māori to take control over their own affairs and determine their own solutions.
“What Māori need and require is funding. This is something to look forward to and many iwi, hapū and marae operating in the sector will be able to access these funds.
“Although it won’t address the increasing demand and need for housing from Māori, the detail of ring fencing of funding for infrastructure is important to note given the lack of infrastructure, especially in rural areas.”
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