This year I am even happier than usual to be a mere commentator and not an active participant.
For several years, the government has had a "structural" deficit, meaning its spending will inevitably exceed its revenue. So the government’s debt - on behalf of us all, currently around $100,000 per household - will keep rising.
Just like for ordinary people, a government has fewer options when its back is to the wall.
Continuing to live beyond our means will have dire consequences: accelerating interest payments, which could otherwise have been spent on other things, and deteriorating standards of living - and more brain drain to Australia.
Unless "something" is done.
There are just three possible "somethings" that can be done: increase taxes, cut spending, or grow the economy.
This year’s Budget, Nicola Willis’ second, ruled out higher taxes. Instead, her focus was on spending cuts offset by some spending increases - in other words, "spending reprioritisations" - and several growth-friendly policy initiatives.
More than a hundred spending reprioritisations - actual and forecast - were announced. Passed into law a fortnight ago, the largest and most controversial is, of course, changes to the pay equity regime.
In Ms Willis’ words: "Making those [pay equity] changes means the government can repurpose $2.7b a year, on average, towards Budget priorities like health, education, and law and order."
Another central plank of this year’s Budget is a new tax incentive scheme called Investment Boost, encouraging businesses to invest in productive assets.
Ms Willis began her speech with: "This is a responsible Budget to secure New Zealand’s future."
I agree with the first half of her sentence (given her options). But I’m doubtful about the second. Much more reform is needed.
■ Paul Hansen is an emeritus professor, department of economics, University of Otago.
