Budget Blindness

One important thing that appears to be lacking in most budget commentaries, is real analysis or critique of the Government's overall vision or economic strategy. After almost nine years of controlling the purse strings, one would think that something would stand out as a planned outcome that had been well-articulated since 2008. Most commentators have just focused on the surface features of Steven Joyce's first effort; who gets what and the short-term political consequences. This approach just feeds the lolly scramble mentality and treats the budget as a moment in time rather than part of a bigger story.

The bigger story in this case is that this National Government has never delivered on the economic strategies it has promoted over its three terms in power. In 2008 it was mining and oil, to replicate the Australian economy of the time (never original thinkers); in 2011 it was the $11 billion motorway investment or the Roads of National Significance (RONS) that would rejuvenate the country; and in 2014 it was doubling of agricultural exports and leaping on the back of the dairy boom. At the same time that oil exploration and coal mining were being subsidised, roads receiving windfalls and intensified dairying enjoying irrigation investment - social services experienced funding restrictions and job losses (delivering more for less?).

It frustrates me that National can deliberately misinform New Zealanders to create an impression of competence, and is rarely challenged. It has constantly used the Canterbury Earthquakes to help explain its borrowing and austerity measures and yet the $16.5 billion, that Brownlee claimed the recovery has cost the government, is a gross exaggeration. One estimate puts the real figure at only around $2 billion and more has been squandered on the RONS (that fail any rigorous cost/benefit analysis). The Great Financial Crisis is also used as an excuse and yet while the odd investment company got caught out and South Canterbury Finance was bailed out, the real impact on New Zealand was minimal. Our Australian banks remained strong, returning huge profits. In fact in 2009 they were forced to pay $2.2 billion in back taxes that would easily cover the SCF bailout of $1.7 billion.

Then there is the story of New Zealand as the world's "Rock Star" economy. It comes from an impression of economic growth based on volume, not value, and a massive property bubble. Productivity per person was actually relatively low and in 2013 New Zealanders worked 15% longer then the OECD average to produce 20% less. We are also regarded as a low wage economy. When the high dairy commodity prices crashed, and the Christchurch rebuild slowed, the Government was fortunate that high volume tourism and a huge growth in immigration continued to ensure ongoing economic activity. As we all know the infrastructure to support both is massively lacking.

The recent surpluses that Bill English and Steven Joyce have managed to deliver are largely due to the underspending than good management. The collateral damage caused by successive years of austerity is being belatedly addressed in the form of election bribes. Of course English and Joyce are claiming that the money is only available because of their measured management and safe economic hands. Families who have been homeless for some time or had a loved one commit suicide because of struggling mental health services understand how the surplus was achieved.

Few commentators look back at the journey and mismanagement that got us here and few will look at the long-term effects of the money promised. While the struggling poor will be grateful, the real windfalls will still go to landlords because of the increased accommodation supplement and employers paying minimum wages will continue to have their employment costs subsidised.

The wealthy won't look too closely at continued wealth shift under the new budget and the poor won't question the hand that drip feeds them...Budget Blindness!


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