New Zealand's Austerity Through Stealth

The National Government have made much of the fact that the $50+ billion it has borrowed was to maintain benefits and services after the GFC and to fund the rebuild of Christchurch. We have not been subjected to the level of austerity measures that the Greeks have suffered, however despite the constant claims from Bill English that funding is not being cut to essential services the reality is quite different.

First of all the GFC had a minimal impact on New Zealand (probably less than the $17 billion hole left by the dairy crisis). While Gerry Brownlee talks about the $16.5 billion Government contribution to Christchurch's recovery, one analysis of actual spending estimates its contribution so far is as low as $2 billion. Much has been promised but little delivered.

It seems that much of the borrowing was needed to fill the hole in revenue from the Government's tax cuts (around $2 billion a year) and over $3 billion a year is needed to cover the increasing costs of subsidising inadequate wages (Working for Families). Superannuation is essentially a Universal Basic Income for all those over 65 and because this demographic is growing rapidly, so is the cost to cover it. Currently superannuation uses up 16% of crown revenue and by 2031 it will cost over $20 billion to finance. The Government also made its $12.3 billion Roads of National Significance its biggest policy investment (despite many of the motorways not passing proper cost/benefit analysis).

In an effort to balance the books, and cover the above, a reduction in spending was required across the board. There were some dramatic cuts in areas where the Government felt they could get away with it like the $400 million wiped from Early Childhood Education and the $62.7 million cut from DoC. However Solid Energy's $400,000 million collapse sucked much of the savings made by reducing the support to our children and our conservation estate.

To hide its austerity measures the Government starting cutting budgets with the claim that they were improving frontline services by demanding better use of less money. The $25 million cut from the Ministry of Education had the opposite effect when frontline Special Education staff numbers have been reduced.

The Government is underfunding agencies and services all over the place through arbitrary funding caps and increases that still do not account for the real costs. There are numerous examples of this happening to NGOs and to state services that are causing real hardship, suffering and often the loss of a service completely. Some examples:

  • Christchurch lost its only Rape Crisis Centre, not because it wasn't fulfilling a useful role, but because demand was so high that it became insolvent. The Government then decided that if it couldn't manage on a minimal budget it shouldn't exist at all.
  • Relationships Aotearoa was expected to take on extra work (that was once the responsibility of the Government) but on reduced funding. When the organisation couldn't get the inadequate funding recognised it decided that rather than incur even greater losses, it would just close its doors.
  • The Independent Police Conduct Authority is currently struggling to manage its workload within the current budget and more than 90% of complaints are being thrown back to the police to investigate themselves. It is concerning that essential independent scrutiny is not being applied as much as it should when the number of complaints are increasing. Despite the Auditor General advising that a boost in funding is needed, Amy Adams responded with "the authority needs to plan effectively to meet increasing demand using the funding available".
  • Mental Health services in Christchurch have had their funding cut to a level below the national average despite the greater demands on their services. What is even more appalling is that it had an increase in demand after the closure of Relationships Aotearoa, then it too was forced to operate on a reduced budget. Many of those working in mental health are on minimal wages and are suffering from their own health issues because of work pressures.
  • Despite the Government claiming there have been substantial increases in health funding the increases clearly are not accounting for our increasing population and greater demands from growing numbers of elderly and those with Type 2 diabetes etc. DHBs are also now being expected to cut their budgets further and although surgery numbers have increased it is clear that many hospitals are now operating below capacity, thousands are known to have missed out on elective surgery and enormous hidden waiting lists may exist. 
  • The Government has deferred $1.2 billion of state house maintenance and has not invested in new building but has expected Housing New Zealand to use rental incomes to pay the crown a dividend each year (118 million for 2015). Consequently thousands of families are forced to remain on long waiting lists and live in conditions that have resulted in deaths. 
New Zealand has been experiencing considerable austerity measures ever since National first came to power in 2008. It has helped fund tax cuts to the rich, it has supported the growth of a cheap labour force that has subsidised the substantial profits of supermarkets and rest homes and it has enabled the Government to balance its budget despite multiple disasters of its own making (Novopay, Solid Energy and now the Health Ministry and MBIE have had financial blowouts). 

Austerity is not the path to a stronger economy or a better future. As Greece has discovered it just increases poverty, especially for children, and reduces the ability of local industry to respond to the global economy and new markets. In short austerity leads to a downward spiral. 


robertguyton said…
What's this? Tobacco Todd's been a sneaky boy, has he?
MIke Nixon said…
National run the country at a loss knowing the taxpayer will foot the bill while banks reap record profits. Just so gross what has been done to what was a decent country with a fair to for all.
bsprout said…
Robert, shafting Glenys will be damaging and I'm sure the details will slowly emerge.

Mike, sadly Labour is responsible for some of it too and National is very good at pointing this out. It does damage Labour's credibility.

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