Prudent approach taken by Willis

Nicola Willis started out in politics watching her then boss, finance minister Sir Bill English, deliver solid, sensible Budgets.

The sorcerer’s apprentice is now at the despatch box, desperate to prove that she has not gone to sleep as Finance Minister and let a flood of economic despair wash over New Zealand.

As debut Budgets go, this was a pretty responsible effort. Ms Willis only occasionally waved her magic wand and all the big spending initiatives - not that there were many - were signalled well in advance, and duly delivered.

She was careful not to overreach herself, apart from her outrageous claim that implementing tax cuts made her a working-class hero. It was designed to rile the other side of the House and succeeded admirably.

But flair is for election-year Budgets. For the rhetoric that you are repairing the other side’s economic vandalism to soar, you need to demonstrate some fiscal rectitude, and Ms Willis has set herself some tight parameters.

In Budget 2024, Ms Willis committed the government to $3.2 billion in new spending this financial year - which sounds like a lot, but in some recent Budgets it has been closer to double that.

What is more, that allowance drops in following years to just over $2b - and if you factor in already committed multi-year spending it will be even less come 2026.

If National was planning on Ms Willis spending its way back into power in election year, there does not seem to be much chance of a vote-grabbing spending spree on those numbers.

What "spree" there was has been a very restrained one: health and education boosts were modest and difficult for the Opposition to take aim at - it, too, trumpeted its own spending in those areas. Law and order got enough to satisfy the case of each of the governing parties.

While there is enough in it to give National’s coalition partners something to campaign on, there was no evidence that they have held Ms Willis to ransom.

Winston Peters got the latest incarnation of the provincial growth fund and David Seymour got his tax cuts ... not as much as he would have liked and he did not convince the minister to flatten tax rates.

That said, she did make a point of mentioning that the discussion had happened during her Budget speech, leaving the words "watch this space" unsaid. This will be one to watch in future.

But in the here and now, this Budget was always going to stand or fall on the quality of its tax cuts.

No-one is going to go into flights of ecstasy about what they are about to receive. They are not minuscule, but nor are they major - if there is a middle ground between moderate and mild, that is where Ms Willis has landed.

She - and perhaps more importantly National’s substantial backbench - can proudly point to Budget 2024 and say that an election promise has been fulfilled.

Whether those in Ms Willis’ much-referenced squeezed middle will feel that she has done enough to loosen the clutches of the recession on their straightened households is a moot point.

This is a Budget which does not buck the rules, and Ms Willis will not need rescuing by her master. She has confidently stood on her own two feet and made her own mark on the presentation of the nation’s finances.

That said, she has placed great reliance on the ability of the New Zealand economy to bounce back from its current travails.

Although most economic indicators are static at best or heading in the wrong direction at worst, Ms Willis has faith that just enough economic stimulus will be induced by a slew of infrastructure spending that economic growth will return to a positive number and that the books will be back in surplus by 2027-28.

That seems a heroic assumption from the perspective of winter 2024 and will require a lot of things to go right - no more new foreign wars, cyclones or Fantasia-style floods please.

"This Budget shows what is possible with care and with discipline," Ms Willis said at the end of her Budget speech.

She has demonstrated both in Budget 2024, but she may well need courage and determination for Budget 2025 and beyond.

mike.houlahan@odt.co.nz

 

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