Budget 2020: In the midst of a pandemic, and with New Zealand beginning the long road to recovery, today’s budget was heralded as potentially the most momentous in a generation. So what did the experts think?
Generation Zero: Good, but not good enough
Around the world, experts and multilateral institutions such as the World Bank are calling upon governments to lead a green recovery from the Covid-19 pandemic. Attempting to return to our unsustainable pre-crisis economy and way of doing things may seem tempting, but the economic and environmental costs of inaction are simply too high. While we support increased investment in infrastructure and housing, we remain concerned that this 2020 budget lacks the vision this moment requires.
Low-emissions transport, such as rail, offers people and businesses a greener way to move themselves and their goods around Aotearoa. Therefore, we believe that investment in rail infrastructure makes good economic and environmental sense. Better insulated homes keep people warmer and reduce emissions, so we also support the expansion of the Warmer Kiwi Homes programme.
However, we believe the government should do more to support a just transition to a low-carbon economy. New infrastructure projects, especially roading, should be assessed in the light of a low-carbon future to avoid creating stranded assets.
Rather than placing a double burden of financial debt and climate change on us and our children, we hope the government will consider the costs of climate inaction as they implement this budget.
Generation Zero is a non-partisan, youth-led climate organisation that campaigns for a carbon-neutral Aotearoa.
Sam Stubbs: A sensible, well judged budget
Additional money is being spent on what is already working ie.wage subsidies. And there’s more for housing, easily New Zealand’s biggest social problem, with $20 billion put aside for future problems that will inevitably arise.
It’s also targeted assistance where NZ has competitive advantage, for example trade and enterprise, and in areas where we need to focus on as a nation like trades training, tourism, the environment and Māori and Pasifika issues.
There are two wastes of money in the budget: extra for rail (which could be better spent on electric buses and bike lanes) and defence, where the Hercules replacements should have been funded from an already approved (and enormous) defence procurement budget.
All that said, Grant Robertson is joining a pantheon of world class NZ finance ministers. It started with Michael Cullen, continued with Bill English. And now, for his calm under fire, Grant Robertson makes it a threepeat.
Sam Stubbs is the founder and managing director of KiwiSaver and index fund provider Simplicity
Gabrielle Baker: Little more than the bare minimum for Māori health
This budget seems based on the idea if we just do more of what we’ve done before we’ll get better results. And we probably will, for the people we were already doing pretty well for. Meanwhile inequity goes unchecked. Racism, still thriving.
Looking at what this budget offers for Māori health, it’s hard to ignore that less than a year ago the Waitangi Tribunal found numerous breaches of the Treaty in primary health care. Except that the government has managed to do just that.
I know that we are dealing with our nationwide recovery from Covid-19, but in fact redesign in the wake of moving to level 2 (and beyond) would have been an opportunity to literally put their money where their mouths are in terms of honouring Te Tiriti and improving Māori outcomes. And if, as Minister Henare said today health and wellbeing is the number one priority, you’d expect a real focus on support Māori economic wellbeing.
In the 80s and 90s we also saw rough economic waters and widening unjust and unfair differences in socioeconomic resources between Māori and non-Māori. We also saw widening gaps in life expectancy and other health outcomes between Māori and non-Māori. Being serious about eliminating inequity would mean doing something serious about the wider determinants of health, like welfare, education and employment. So you can forgive my lack of praise for $50m in Māori focused trades training from a pool of $1.6 billion.
There are some things I’m pleased to say, more funding to Māori providers via Whanau Ora Commissioning is part of that. More disability support funding is also good if it helps it keep pace with need. But given the (unmet) needs of Māori with lived experience of disability and the disproportionately low numbers of Māori providers funded to provide disability support services, I’d want more assurances that this money was enough to do more than the bare minimum.
Gabrielle Baker (Ngāpuhi, Ngāti Kuri) is a public health consultant. Her primary interest is in a pro-equity and anti-racist health system.
Iain White: The start of a long haul for state spending
The country was in a fortunate position going into the pandemic. Its debt was low and it had the experience of the GFC to fall back on. You can see how the budget reflects both these aspects.
The first takeaway is the size and scale. It is gratifying to see the government significantly increasing state spending to offset the contraction in private sector investment and lower consumer confidence that we know is happening. Those countries that did this in the wake of the previous economic crisis had a shorter and less severe recession than those who used the false analogy of household spending and cut spending as income dropped. Even if we were more isolated than most countries from the effects of the GFC, it is clear we have learned the lessons. This is the rainy day.
Turning to specifics associated with the recovery, the Covid Response and Recovery Fund to invest in infrastructure seems much lower than many may have suspected. It is an initial $3bn, but the total of the ‘shovel-ready’ projects submitted was $136bn. There are going to be many disappointed people, and, if it is spread around the nation as previously indicated, that figure will not go very far at all.
That said, this decision might not be a bad thing. It feels more like an attempt to keep some powder dry and a desire to get infrastructure investment right rather than about limiting the total sums that will flow into this area.
This leads to the other issue I’d like to flag up as a feature of the budget: flexibility. The economic forecasts and numbers associated with budgets tend to sound accurate, but in reality I suspect the government realise that this time round they are very, very soft. All projections are right now. We simply do not know what the effects will be and how long it will last. So the language peppered throughout of ‘phases’, ‘steps’, or trailing future interventions, appears to be a realistic way to reflect the specific nature of this crisis. In contrast to previous budgets, this feels more like the start of a long haul of state spending that will unfold throughout the year and beyond, rather than a one-off annual event.
Iain White is a professor of environmental planning at the University of Waikato
Perry Rush: Funding for the arts in schools still desperately needed
What we have learned from the Covid -19 pandemic is that our level of economic and social inequity is detrimental to the educational opportunities of far too many young people. Health and well-being for many families is now a luxury.
We are pleased that after today’s budget an additional 200,000 disadvantaged young people will be getting lunch at school and we welcome the $79.7 million learning support package, including extra support for ESOL (English as Second Language) and SHHNF (Student High Health Needs Fund), but note the absence of funding to support the mental health and violence issues teachers face in schools.
Small increases in operations grants will keep schools afloat and capital increases for school property will help provide the facilities to deliver quality education. Funds to revitalise te reo are also welcome.
We cannot make realistic headway in addressing inequities and well-being by doing the same things. We are educating human beings and we must inject humanity into our school curriculum. What education needs more than at any other time is an infusion of the arts.
The arts in schools have withered in the past 20 years. We need an entire arts advisory section of the Ministry of Education to begin the journey of putting the humanity back in young people’s lives and building their well-being. We trust that at least some of the $20 billion still to be allocated, will be applied to this critical work and to the provision of in-school initiatives for youth mental health, well-being and behaviour.
We await more specific information about the funding of the Tomorrow’s Schools Review outcomes and look forward to working closely with the Ministry of Education on the development of the new Education Service Agency.
Perry Rush is the president of the New Zealand Principals’ Federation
Nicola Gaston: A missed opportunity to support research and innovation
Under normal conditions, I might describe this as a disappointing budget for science. There is a tiny bit of cash put aside to increase Strategic Science Investment Fund Platforms programme funding for Crown research institutes, acknowledging attrition of funding; there is a small capital injection of $15 million into ESR – and that appears to be it. There is $150 million for business loans to support R&D – that number appears to be what Treasury pointed out last year was needed to move government spending towards its stated 2% target, so is not accidental – but this, while a welcome complement to the science sector, does not replace investment in the development of skills and capacity in research. That said, the increase of the per student subsidy for tertiary education is welcome though overdue, though it is a relatively small scale investment alongside the money put into trades to encourage people to retrain in selected industries.
More than an increase in specific numbers, I would have liked to see a more holistic approach taken to recognise how the research ecosystem can support recovery and develop the resilience of the New Zealand economy over the medium to long term. Under Covid-19 conditions, the budget was never going to be what it would have been prior – and I would never suggest that Research, Science, and Innovation should be higher priorities than Social Services, Health, and Education right now – but it would have been reassuring to see budget signals designed to create activity in the science system in the right places. The biggest threat to the long term stability and success of our research and innovation ecosystem right now is that we lose capacity as people disengage, fail to complete their studies or research programmes due to economic impacts, and that these losses are compounded by disrupted career paths and lost opportunities due to closed borders over the next year or even longer time frames.
We are going to need to be agile and proactive in order to retain talent – and in the short term, I would have liked to see more emphasis on immediate retention strategies, rather than retraining alone. It is always possible, of course, that some of these outcomes will be able to be achieved by work being done within the sector and within MBIE – for example, by re-prioritising Catalyst Fund expenditure to support International Research Relationships, to support postdocs based in New Zealand – but I do think the time is ripe (or in fact, now urgent) for a well-designed postdoctoral fellowship scheme that would retain and develop talent within New Zealand to support our high impact, low footprint industries in sustainable innovation and green tech.
So what is most disappointing to me, in fact, is to see yet again that this opportunity has been missed. But if we are to discuss what is missing in this budget, the leading contender would be our Zero Carbon goals: they appear to be missing not merely in action, but in aspiration. This cannot and must not become our new normal.
Nicola Gaston is an associate professor in the department of physics at the University of Auckland and co-director of The MacDiarmid Institute for Advanced Materials and Nanotechnology.
Oliver Hartwich: KiwiBuild on steroids
Budget 2020 delivered the scary debt figures and bleak economic outlook most people expected. If anything, the overall picture was probably still too optimistic. If GDP only declined by just under 5% over the coming year, New Zealand would have been very lucky indeed.
In any case, the budget did not deliver the strategy which will get New Zealand out of this hole. Unfortunately, the budget is all about spending based on good intentions. The government obviously expects to lead the recovery.
As KiwiBuild demonstrated, good intentions plus a large amount of government money do not automatically equate to success. But Budget 2020 is KiwiBuild on steroids.
The government is throwing everything it has at the economy, and then some. Infrastructure, rail, public housing, school meals and substantial make-work projects in environmental protection: everybody gets a piece of the action. And yes, some of those spending initiatives like vocational training may even produce some positive results.
Yet beyond such spending initiatives, there is no overall strategy to grow the economy and reopen the sectors hurt by Covid-19. International tourism and education exports are crying out for a way to come back through the trans-Tasman bubble and to open the border with a quarantine scheme.
This budget risks leaving a legacy of enormous public debt with few good economic outcomes to show for it.
Dr Oliver Hartwich is the executive director of The New Zealand Initiative.
Cath Conn: A welcome focus on green jobs
It was encouraging to see that $1.1 billion has been allocated to environment jobs in today’s budget. Protecting environments locally and globally is the single greatest challenge societies face and New Zealand has a positive global reputation for its natural heritage. Ideally investment in the environment should be part of a wider shift from consumer capitalism to a new environmentally-sensitive capitalism, with a greater investment in places to walk and cycle safely, promotion of sustainable food systems, support for ecotourism and green hospitality, support for e-transportation and repurposing buildings for all, such as schools and workplaces, to promote health.
These measures would be vital in redirecting the health system from one that is focused on managing the sick (the current role of district health boards is essentially that) to monitoring and protecting against sickness. The absolute lack of a global public health monitoring and protection system is why we are experiencing the Covid-19 outbreak in its more extreme manifestations. New Zealand also had under-invested in public health prevention and protection measures for at least a decade. The lockdown provided the current government with some much-needed time to ramp up public health protection, for such as contract tracing and epidemiological monitoring. It now needs to be part of a joined-up approach to health which keeps people and planet safe forever.
Dr Cath Conn is a social scientist and the co-director of the AUT Child and Youth Health Research Centre
Kendall Flutey: It’s big, but not exactly bold
While I’m all for the idea of rebuilding together, at first glance I am slightly concerned about what exactly it is we’re rebuilding and whether what we’re building together will be enjoyed equally.
A serious attempt has been made to support those displaced and suffering, but does this budget go far enough to acknowledge that the weight of burden in Aotearoa has not been shouldered equally? The lack of increased welfare support and relatively insignificant student hardship grants are disappointing, particularly when reconciled with the $72.5m racing industry package.
Additionally, I struggle to call Budget 2020 bold. It’s large, sure. But does it take risk? Once in a lifetime crises offer once in a lifetime opportunities – the opportunity to experiment, and not merely rebuild in the former footprint.
Take education. The sector investment is significant, however the funding allocation displays a regression to the known. The $1.6bn trades and apprenticeship training package hits snooze on today’s problem only to wake up to over-supply and lack of job security tomorrow. Had we placed this kind of investment into digital technologies education we could have seen Aotearoa transform a 10% unemployment rate into a digitally empowered global provider come 2024.
Isabella Lenihan-Ikin: Tertiary hardship fund a step in the right direction
Education is the passport to opportunity. Although Budget 2020 has made steps towards addressing student financial hardship and barriers to tertiary education, it missed the critical opportunity to transform the tertiary education sector for good, after 30 years of neglect.
Three standout parts of the Budget for tertiary students include the development of the $20 million hardship fund for tertiary students; a $1.6 billion investment in free trades and apprenticeships and; a $16 million dollar investment in adult and community education.
The $20 million hardship fund for tertiary students is welcome, however it will only provide short-term relief to students facing hardship arising from Covid-19. It does nothing to address the long-term poverty, financial insecurity and rising living costs that tertiary students experience, and which have only been exacerbated by Covid-19.
Investments in trades training, and adult and community education has reaffirmed the government’s commitment to education being a public good. However, the government could have used this opportunity to remove more barriers to tertiary education, such as fast tracking their three years free fees policy.
Furthermore, the government has ignored the calls from learners to transform the student financial support system. The government has signalled that there is more support for students to come, and with $20 billion left unallocated from today’s budget, we hope the government will act on the growing call for a Universal Education Income.
Isabella Lenihan-Ikin is the national president of the New Zealand Union of Students’ Associations (NZUSA)
Nick Loosley: A huge boost for food, our most precious resource in times of crisis
Since the Food Act in 2014 New Zealand has made great strides forward in reducing food going to landfill. We now have organisations across the country rescuing perfectly good food before it is thrown out but with a lack of communication, cohesion and an overall National Strategy. The increased demand on food banks due to Covid 19 has clearly sparked a realisation that food distribution, particularly to vulnerable people needs further attention. Money to create what has been dubbed The New Zealand Food Distribution Network will hopefully ensure we continue to make progress here and surpluses can be shared between regions.
The boost for community groups, especially those helping Māori, Pacific, refugee and migrant communities means more of this precious kai will end up nourishing our most vulnerable. A school lunch scheme is a huge undertaking, but I see this as a positive step towards pulling many of our children out of poverty and making the lives of single and working parents more manageable.
Nick Loosley is the founder of food waste and food poverty charity Everybody Eats.
Liam Hehir: A prudent approach was necessary, and Robertson delivered
I went to Palmerston North’s mall, the Plaza, today to get felt pens for my kids. The great shopping Mecca of the central North Island was filled with people. The line to get into Kmart was long. I expected that. The line to get to the checkout that snaked around half the store, however, was worse than anything I’ve experienced at Christmas.
For weeks and weeks we’ve been cooped up in our houses, allowed out only for excursions to the supermarket and pharmacy. In the same way that we gorged away through a months worth of McChicken burgers a few weeks ago, we have proven ourselves to be consumers through and through.
But it’s hard to see this being sustained. Economic shocks have delayed effect. After the sugar risk of being allowed into the malls ends, the bills will start to fall due.
Grant Robertson’s job today was to make it clear he understands the need for prudence. For the most part, he hasn’t done too badly. There was no Keynesian tax relief. There was no UBI or fundamental break with the post Muldoon consensus, either. The temptation of helicopter money was largely avoided. That was never to be expected from a disciple of Clark and Cullen.
Within the parameters of what Robertson’s constitution allows, however, the budget is bold. We will be putting an eye-watering amount on the national credit card. That’s just something you have to do sometimes and thankfully the hard work had been put in over the previous decade to allow this kind of expenditure.
Whoever succeeds Robertson as finance minister is going to have a hell of a job to get on top of it all. Well, that’s life. I am sure there will be no shortage of job applicants.
Robertson can’t save us from the lean times to come. The wage subsidy has been extended but under narrower criteria. In any event, firms just can’t hang on forever with only partial relief for what is usually their biggest cost.
The targeted approach is not without risk and is in some ways suboptimal. Public servants based in Wellington do not have the best track record when it comes to picking and choosing winners and losers in the real economy. But, to be fair, the administration of the government’s response so far has exceeded expectations.
It is important to note that the government hasn’t yet allocated all the spending it has announced. So in many important ways, the jury remains very much out.
But with his conservative approach, Robertson has shown he has the potential to be his generation’s Bill English. That is intended as a compliment. And after what he’s been through this year and the insights he will have gained, I am sure he will take it that way.
Liam Hehir is a political commentator
Susan St John: Working For Families still waiting for a fix
Are the costs of Covid-19 fairly shared? Budget 2020 rightly focuses on protecting jobs, education and retraining. And it is very important to protect family incomes this way in the economic crisis. However, many firms will not survive the enhanced wage subsidy period and unemployment is forecast to rise to around 10%.
As more workers access the very low, poorly designed welfare benefits, means-tested supplementary hardship payments will sky rocket. Hardship payments, the accommodation supplement and recoverable assistance are projected to grow 40% to $3.72 billion by 2024. Low income families in and out of benefits and casual work in the protracted recovery will see their balance sheets eroded and many may never recover.
There will much more child poverty. The budget projects a sharp rise in numbers in child hardship and a worsening of the numbers under the fixed 50% line poverty line. This matters because the costs are experienced immediately and unfairly by poor children, and society will pay the price of deeper family distress, ill health, transience and family dysfunction.
Disappointingly the budget did not spend the half a billion necessary to fix the discrimination against poor children in Working for Families. While removing the need to satisfy the hours test for the in-work tax credit from 1 July 2020 is better than nothing it is only for “working” families who are not receiving a main benefit and have some level of employment income each week. Budget 2020 has not taken the opportunity to correct this policy and enable all families on low incomes whether on benefits or not to have the full Working for Families package.
The budget says the change to the in-work tax credit will cost an additional $128 million over four years. This is a false way to cost this policy as these families should always have been allowed to keep their child payments regardless of losing hours of work.
Susan St John is an honorary associate professor in the Economics Department, University of Auckland, and a founding member of the Child Poverty Action Group
Samantha Murton: GPs left hanging
Despite our sector running the frontline defence against Covid-19, and pivoting our business model to do it, we’ve been left out of today’s announcement. However, we’re looking to work with the government on what the finance minister described as “further support to the health sector in the coming months”.
During lockdown GPs moved 70% of our patient appointments to remote consultations. An unexpected outcome was greater medical access to high-needs and rural communities who no longer needed to travel or spend unbudgeted money to receive care. Health equity is crucial to GPs. Ethnicity, location, cost of care, and rurality are all barriers to primary healthcare access, which this Budget needed to address urgently so those falling behind don’t continue to suffer in the aftermath of Covid-19.
And we need a rethink on how primary healthcare is funded. The capitation model is very “one size fits all” and needs reworking to cater to the increasingly complex needs of our patients. I didn’t see anything in today’s budget that shows me a revitalised future for general practice, but I hope that in the next few months we will.
Dr Samantha Murton is president of The Royal New Zealand College of General Practitioners
Clarissa Mackay: A milestone for the free school lunches campaign
Today’s budget is a major step forward for the children of Aotearoa/New Zealand. The expansion of the school lunch initiative by $220 million can ensure that every child in our country has the chance to succeed at school and in life. This development wouldn’t have been possible without the many groups in New Zealand highlighting the need for better social safety nets and a government that has taken this historical step forwards. We now need the government to focus on the implementation of this initiative, ensuring we have a strong foundation to build a successful programme. The coming weeks and months will be critical in establishing a knowledgeable and capable team to ensure success. But for today, this group of mothers who started on a mission three years ago, speaking with MPs, charities, the United Nations and World Food Program, can celebrate that no child in NZ will go hungry again.
Clarissa Mackay is a founder of the Eat Right Be Bright campaign for government-funded lunches in schools
Russel Norman: Climate action is missing in action
Budget 2020, the biggest spend-up in a generation. In the middle of the biggest public health and climate crisis in a century. But where was the climate?
The conservation spending is good, but let’s be honest, this is really a retrospective taxpayer subsidy to unsustainable industrial agriculture. The harm caused to rivers and wetlands by intensive dairying over previous decades will get cleaned up a little. But the system that caused the harm will remain unchanged.
We really, really need to change the industrial agriculture system – and budget 2020 doesn’t do it. Climate pollution and water pollution are simply byproducts of industrial agriculture and, until we embrace regenerative agriculture, they will continue to pollute our air and water. And get this – the government’s own projections say that under current policies New Zealand’s net emissions will increase 20% from 2005 to 2030. 20% people! Budget 2020 doesn’t change this embarrassing truth.
There is a bit of money ($1.2b) for rail which is good, but it is still dwarfed by the January announcement of cash for motorways. There is nothing to support the installation of rooftop solar that the grid operator Transport says is critical to providing zero emissions power to electric cars. There will be a bunch of new state houses but will they have solar panels? Will they have decent insulation, or will they meet the standard the least insulation you can legally have – the Building Code?
This unprecedented spend-up was an opportunity to reset policy for a generation, and to really tackle the climate and ecological crisis – but it just doesn’t do that. We must hope that there’s some really transformational initiatives planned for the remaining unallocated funds. We will be watching.
Russel Norman is executive director of Greenpeace
Laura O’Connell-Rapira: A lacklustre budget that failed to match the rhetoric
Leading up to the budget, I was excited to see if Labour would finally live up to their rhetoric of transformation, and I was quickly disheartened to see them fail.
Sure, the $1b to create 11,000 environmental jobs is a great win for the climate movement, the Greens, our wild places, and regions. But everything else was pretty lacklustre.
There is a homebuilding programme to build 8,000 new state and transition houses over the next five years, but that’s peanuts when you compare it to the 100,000 homes that Labour promised before the election.
Lunches in schools got a boost which is good. But New Zealand has had a long period of low wages, eroded benefits and high housing costs so unless people in government are willing to make sure parents aren’t locked in poverty, we are going to keep seeing children in poverty too. The government’s failure to meaningfully increase or individualise benefits, or guarantee living wages, has all but ensured this.
Then there is the $1b for the Defence Force and the $587m for 488 new prison beds. If this is a government of kindness, I’d hate to see what a government of fear and punishment looked like.
Finally, and most importantly, this budget – like too many government budgets – completely fails to acknowledge the Crown’s Te Tiriti o Waitangi obligations. Māori are treated as a vulnerable group for the government to save as opposed to their capable Treaty partners. Yes, there was $900m in the Vote Māori package, but how much of that is tagged for Māori to deliver state programming versus determining and delivering our own aspirations? Until Labour can move past paternalism into true partnership with Māori, I worry rhetoric of transformation is all we will see.
Laura O’Connell Rapira (Te Ātiawa, Ngāpuhi, Te Rarawa, Ngāti Whakaue) is the director of ActionStation.
Paul Spoonley: Last year’s wellbeing priorities now even more acute
The 2019 New Zealand budget attracted global attention because it was portrayed as a “wellbeing budget” with a particular focus on mental illness, family violence and child poverty. Covid-19 has inevitably changed the government’s priorities so that jobs, (re)training and infrastructure now take centre-stage.
Treasury’s Living Standards Framework talks about the importance of “human”, “social” and “natural” capital as well as “financial and physical capital”. Business and employment sustainability need to be front and centre at this point because they are important contributors to individual and community well-being, especially given the levels of disruption and anxiety that are currently being experienced.
The irony is that the wellbeing priorities of last year are now even more important than ever. The “missing middle” in mental illness, those with mild to moderate anxiety and depressive disorders, has just got a whole lot more significant. The socioeconomic disparity that contributed to child poverty has become more acute.
The budget is not entirely silent on these issues. There is funding for family violence reduction. There is an interesting section on ‘rebuilding the Pacific community’. The fact that 200,000 school children are now going to be fed will certainly help. There are some interesting environmental initiatives. I worry that some aspects of well-being have been addressed but not others.
Distinguished Professor Paul Spoonley of Massey University is involved with Koi Tū; Centre for Informed Futures.
Catherine Leining: Locking in a future we want for climate change
In November 2019, the Zero Carbon Act placed New Zealand firmly on a path toward decarbonising our economy. While the pandemic has cast a shadow on our path, it must not divert us from our path. As we prepare to borrow billions from future generations, we owe a duty of care to serve future generations. The 2020 budget includes some measures that will clearly support New Zealand’s low-emission transition, such as funding for rail, home insulation, pest control in our forests, and ETS preparations in the primary sector.
What it does not contain is a clear emissions price signal to climate-proof the rest of the investment package, and a clear strategy for redistributing the valuable government revenue from emissions pricing to support households, businesses and communities with a just low-emissions transition. The potential for this budget to lock us into – or out of – a desirable future reinforces the importance of the Climate Change Response (Emissions Trading Reform) Bill, currently under consideration by Parliament.
Catherine Leining is a policy fellow at Motu Economic and Public Policy Research. These views are her own.
Belinda Storey: Big questions around the unallocated $20bn
In this budget, the biggest questions are about the long-term $20bn for Covid-19 response that is as yet unallocated. Given the continuing uncertainty of the length and severity of the pandemic and the resulting economic crisis, I support the government holding such a large sum in reserve and signalling to international debt markets the amount we may need to borrow. The process by which this is allocated however, must be transparent and provide benefit to all New Zealanders, not just the loudest voices behind closed doors.
As a country we have begun talking about the legislative impacts of the recently applied emergency powers of the Ministry of Health and the Police. As a society however, we haven’t established limits on emergency finance powers, even when those decisions result in debts that create inter-generational obligations.
For example, we, like many developed countries, have under-invested in our infrastructure for decades. As a result, much of our infrastructure fails to meet current needs, and definitely will not have the resilience to withstand future stresses such as extreme climate change events.
I welcome the level of investment in infrastructure, however the speed of expenditure is concentrating power in a handful of industry experts – for example the Infrastructure Industry Reference Group (which is looking at shovel ready projects for development in the wake of Covid-19). The very nature of this group’s expertise will bias their allocation of infrastructure spend on old-fashioned concrete and steel. I recommend the government fund an intergenerational audit of the portfolio of infrastructure investments recommended by this group to ensure it meets the needs of all New Zealand and not just industry representatives.
Since we should expect nasty health and economic Covid-19 surprises over the next couple of years , we need to spend on reducing the range of risks our citizens face. It is good to see a decent chunk of change strengthening our social safety net. I’m very glad to see the focus on child poverty, housing, and domestic violence.
We should also be seeking better understand emerging risks. Long term funding for the Crown Research Institutes (such as NIWA, GNS Science) has remained constant for 13 years. The budget addresses this with just $15m a year over the next four years. Yet on the very next page of the budget, there is $14m allocated to help clean up after a single extreme event (this year’s Southland Floods) – an example of the extreme events these scientists could help New Zealand better prepare for.
On a disaster resilience note, it is good to see a significant investment of almost $900m for replacing our Hercules Fleet. As we face more and more extreme weather events we will need these to help both ourselves and our Pasifika neighbours as the climate changes. For the same reasons it’s good to see the allocation of $48m for improving the aging communications technology of our emergency services.
I fully support the $2m for helping local government improve three waters in New Zealand – oh wait, that doesn’t say $2nb. Well, that’s a drop in the bucket (pun intended).
I am also concerned that with recent strip mining of public consultation provisions of the RMA. The budget signals support for expanding agricultural water storage which, rather than improving resilience to future droughts, instead can encourage intensification of unsustainable farming practices in our most stressed landscapes.
Belinda Storey is managing director of Climate Sigma
David Capie: Defence gets a surprising boost – but all is not as it seems
Of all the sectors to get a boost in budget 2020, defence might seem one of the most surprising. After all, this is a budget focused on economic recovery and job creation, hardly areas where defence shines. And everything tells us there are few votes to be won in hiking defence spending. But while the extra $1.77bn is significant, it is also slightly misleading in that it contains one huge purchase: the $900m one-off replacements for the ancient C-130 transport aircraft. While cabinet is yet to formally approve a business case for five new C130J Super Hercules, it’s surely only a matter of time. If there is one capability New Zealanders of almost every political stripe recognise we need to have, it is something to replace the 50-plus-year-old workhorses.
But the bigger question is what lies ahead? The 2017 coalition agreement committed the government to a $20bn envelope of new defence spending. A serious chunk of that has already gone towards P8 maritime surveillance aircraft, C-130s, a new hydrographic ship and frigate upgrades. Even before Covid, it was hard to see how all of the items in last year’s Defence Capability Plan were going to be pushed through. With ballooning debt and years of deficits looming, that looks even less likely now.
Pity the poor defence policymakers who will find themselves in a real bind as they start to think about the next Defence White Paper due in 2022. On the one hand, a deteriorating strategic environment would suggest we should spend more on our national security. On the other, dollars will be more scarce than ever. And if we move closer to Australia as we seek to expand our bubble, get ready for calls to spend more on defence, not less. That has the makings of a real headache for officials and for the next government, whatever it looks like.
David Capie is director of the Centre for Strategic Studies at Victoria University of Wellington