A balancing act in difficult times

Caricature by Shaun Yeo
Caricature by Shaun Yeo
Budget 2022 will be all about health, and Finance Minister Grant Robertson believes there will be enough money in the Government’s coffers for a meaningful change for New Zealanders. He spoke to political reporter Mike Houlahan.

More than almost anything else, Finance Minister Grant Robertson would like to write a "normal" Budget.

His last three have suffered last-minute rewrites due to major events such as the Christchurch mosque attacks, or been dictated to by the exigencies of dealing with an ongoing and as yet unfinished pandemic.

Budget 2022, likewise, has been influenced by events beyond Mr Robertson’s control: he cannot dictate the impact a war on the other side of the world has had on global markets, and the subsequent domino effect on the New Zealand economy.

Nor can he wave a magic wand and wish Covid-19 away.

But on Thursday afternoon when Mr Robertson stands up to deliver his fifth Budget, he will be doing his level best to deliver a standard, steady-as-she-goes midterm statement on the management of the taxpayer’s funds.

"From our second Budget onwards we have been faced by one immediate crisis or another that we have had to deal with, and I think New Zealand as a country can be proud of how we have come through that," Mr Robertson said.

"We have an economy which the fundamentals of are still strong, we are still growing jobs, we have succeeded as a country in weathering those storms, but they have battered us.

To try to impart some sense of business as normal, Mr Robertson last week introduced new fiscal responsibility rules, which set a ceiling on government debt levels and pledged a return to surplus by 2024-25.

The days of enormous emergency spending should, fingers crossed, be over: stability and assured multi-year funding are key principals Mr Robertson plans to adhere to.

"I think it is time to shift back to having those fiscal rules," Mr Robertson said.

"We had to do an extraordinary amount of spending and work to get New Zealanders through Covid-19 and I think that was the right thing to do, and that has been demonstrated by the record-low unemployment rate.

"But everyone knows that that can’t go on forever, so I wanted to go back to those fiscal rules, which do provide a bit of stability and certainty, which I think is important."

ACROSS the other side of the House, though, the Opposition is stridently insistent that these are far from normal times, that a cost of living crisis is savaging ordinary New Zealanders, and that the Government is heartlessly ignoring their plight.

Unsurprisingly, Mr Robertson rejects the premise that the Government has done little so far, citing petrol tax relief, subsidised public transport and the April 1 package of taxation and income initiatives as evidence.

Also unsurprisingly, he does agree that National and Act New Zealand’s preferred approach — of tax cuts, adjustment of tax brackets and reduction of Government spending — runs counter to Labour’s plan to invest a larger-than-expected tax take in expanding public services.

"I do see it as a very stark difference of opinion about what is the most important thing for New Zealand right now," Mr Robertson said.

"I think it’s the job of the finance minister to weigh that [tax cuts] up against all the other things that are needed right now.

"You will have seen so far that we have focused on targeted support for people so far as the cost of living is concerned rather than tax cuts, which are very much untargeted, across-the-board measures that will deliver a great deal to some people but at a very large cost overall," he said.

"It is a real balancing act, because alongside wanting to support people with the cost of living pressures that they have got, equally you don’t want to do things that would make inflation significantly worse either.

"If you did that, you would end up sort of chasing your tail."

FORECASTS, on which Mr Robertson will be relying heavily, are that inflation is due to level off and then decline later this year.

Nevertheless, his "temporary spike" is also "lasting longer than expected", and the longer temporary lasts the worse off people become ... not something any government wants to be entering an election year having to defend.

"I absolutely accept that there is significant pressure on household budgets ... and we are always looking for ways in which we can continue to support ordinary New Zealanders," Mr Robertson said.

"But the Budget itself has got to invest in core public services that New Zealanders expect and we look to strike a balance between those things, and I think that when people see the Budget next week that they will understand the importance of getting that balance right."

One of those core services — arguably the most important — is health.

A year ago Mr Robertson said that health and climate change — which will be the subject of a major pre-Budget announcement on Monday — would be a key focus of Budget 2022.

THE imminent introduction of health system reforms, which do away with district health boards and replace them with two central agencies, requires adequate funding if it is to succeed.

However, New Zealanders waiting for a cancer diagnosis or a hip replacement care not a jot for a smoother administrative system: they want to see a doctor without a potentially crippling or fatal delay.

"We have got to increase services is the short answer," Mr Robertson said.

"We know the scale of the challenge we are facing and that we won’t be able to achieve every element of what we want in one Budget, but I am acutely aware that people need to see improved services in their community and their family getting the support that they need.

"We are not simply putting more money into the existing system, we are taking those 20 DHBs and putting them into the Health New Zealand and Maori Health Authority model, and I think that will enable us to deliver significant additional services.

"There will still be support in your local community but we will be able to deliver it with a consistency, effectiveness and efficiency which we have not seen under the DHB model."

 

mike.houlahan@odt.co.nz

 

 

 

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