The 2020 budget has unusually big spending numbers due to trying to deal with the Covid-19 pandemic and associated economic crisis. Current New Zealand debt is about 20% of GDP, the budget would over double that to 50% with a reduction back to 40% forecast over the next ten years, so the target is double the relative debt.
But the budget has been slammed as lacking in vision, with a big chunk of money earmarked but not yet committed to anything in particular.
Sam Sachdeva (Newsroom): Robertson’s huge numbers fit the Covid-19 moment
The $50 billion figure tacked to the centrepiece Covid Response and Recovery Fund is in some respects a case of magic with numbers.
Nearly $14b of that had already been spent, with a further $16b laid out in the day’s Budget.
Importantly, that leaves nearly $20b of fiscal headroom for further announcements in the months leading up to the election.
Government staffers were quick to state the $50b number was a cap rather than a target, but Robertson undermined that somewhat by saying it would almost certainly be spent within the next few years.
There were still some striking omissions, however. It was little surprise the Green Party came under pressure from supporters for a lack of policy and funding wins.
…Indeed, Bridges’ canned line that the Government was “turning a $50b problem into a $140b problem” seemed underpinned by the roughly $50b of extra borrowing the last National government took out to cover the costs of the global financial crisis and the Christchurch earthquakes.
Bridges is gambling that voters’ historic concerns about debt levels will outweigh their desire for sweeping support – Kiwis faced a “tsunami of debt”, as he put it.
But Robertson’s statement that the country faced a 1-in-100 year global shock, forcing drastic measures, seemed more closely aligned to the national (and global) mood.
Ananish Chaudhuri (Newsroom): Budget’s worrying debt-to-GDP red flags
First, the prediction that nominal GDP is poised to fall by 4.6 percent this year and more the following year before starting to grow again. Unemployment is tipped to grow to nearly 10 percent. These are pretty dramatic. This is worse than the recession that followed the global financial crisis, when real GDP declined by 2.2 percent and the unemployment rate peaked at 6.9 percent.
What is even more striking is the prediction that by 2023, debt will be more than 50 percent of GDP. I am assuming this is public debt and does not account for private debt. I am by no means a deficit hawk, but this level of debt-to-GDP ratio poses risks for most nations, let alone a small island nation very much dependent on global economic trends.
This level of borrowing will certainly put upward pressure on real interest and exchange rates and counter-act to an extent RBNZ’s quantitative easing efforts. The net effect is anyone’s guess since a lot of it will also depend on what is happening to rates in other countries.
Overall, the budget much as expected but with some significant red flags in terms of the steeply increasing debt-to-GDP ratio.
Bryce Edwards (RNZ): A Budget with big numbers, but little vision
It’s a politically-astute Budget, but anyone looking for big transformative change will be underwhelmed by Grant Robertson’s Budget 2020, according to Bryce Edwards of Victoria University of Wellington.
Politically astute as in good for this year’s election campaign? Big handouts claimed by each of Labour, NZ First and Greens, with a lot more available to be announced before September.
Elements of the Budget that will be praised include the free trades training scheme, expansions to welfare programmes such as Food in Schools, and the significant increase in social housing.
Expectations of welfare and tax reforms were not met. The Wage Subsidy Scheme is rolled over, albeit with much more targeting. This continues the trickle-down approach of hoping that the provision of money to the private sector will flow through to workers who will keep their jobs. Noticeably, there has been no increase in income support.
Generally, even though the government is now spending much more money, the size of the state isn’t actually getting much bigger. For example, there’s a big focus on job creation, but not through a heavy state role.
Perhaps the most interesting element of the Budget is the $20bn of unallocated spending as part of the Response and Recovery Fund, which the government is keeping aside to make spending decisions on in the weeks and months to follow. Some will call this a slush fund, which is probably unfair in a crisis with no end in sight, where not all spending can yet be determined.
It will depend to an extent to how extra spending is announced and what it is used for heading towards the election. Greens have already been promoting the campaign benefits of what spending they say they have initiated.
Max Rashbrooke: Robertson goes for repair, not rebuild
Crises can be an opportunity for sweeping change. Many people, especially but not only on the left, have decided that the coronavirus’s economic shock, alongside pre-existing problems of environmental degradation and widespread poverty, is the perfect platform for transforming their society and their economy.
The Budget does spend extraordinary sums: $50 billion for the Covid-19 rescue fund, against the normal Budget allocation of a few billion dollars extra. But that spending goes largely into propping up existing businesses – $3.2b for extending the wage subsidy – or into existing structures, as with the extra $3.9b for health.
There are some small green (or indeed Green) shoots of transformational change. Free trades training, in construction and related areas, for two years. An extra $1.2b for rail, which could be part of a transition to a low-carbon way to live. A $1.1b for a green jobs fund designed to employ 11,000 people restoring wetlands and planting trees beside rivers. A further $20b of the rescue fund still to be allocated, of which $3b is for infrastructure.
Mostly, though, this is a measured budget.
This relative caution has several explanations. New Zealand First is understood to oppose many of the sweeping changes the Greens and Labour would like to see. Scaling up programmes is also not as easy as people think.
Stuff: Budget 2020 winners and losers
Winners:
- Workers
- The film industry
- Education
- Health
- Transport
- Public Housing
- Māori
- Corrections
Losers:
- Debt
- .Hospitality and Tourism (somewhat)
- Beneficiaries
- Media
- Climate change
- Police
The lack of much for beneficiaries and climate change have been particularly disappointing for the left (which is more Green territory).
Stuff (editorial): Government’s Budget a plan to navigate Covid-19
The Government has laid out its plan for getting the economy back on its feet, coupled with an assurance the country will get through the tough months ahead.
Whether it’s done enough to reassure the public will not be fully known until September’s general election.
Stuff: Parties look to nab wins from $20b ahead of election
A $50 billion Covid-19 rescue package poured out of the Crown coffers yesterday when the government revealed its rebuild plan – but it is the $20b blank cheque that has got the Opposition crying foul.
With just four months and four days until the election, the National Party has labelled it a slush fund for election bribes.
The campaign has unofficially kicked off and even New Zealand First and the Greens started singing from their own songsheets within hours of the Minister of Finance delivering his election-year Budget.
Greens seem to have used the budget to kick off their election campaign (via email):
We have now officially kicked off our Green Reset from the COVID-19 crisis with the release of Budget 2020. We’ve secured massive investment in Green initiatives which will create thousands of jobs while improving life for people and protecting the natural environment.
Voters will decide for themselves whether the Covid-19 pandemic gets sufficient priority over policy opportunism and cynical campaign boosting. It hasn’t helped that Green leaners seem to have been underwhelmed by the budget.
Perhaps there has been some big vision 0 as far as the election and means of Government and political survival.
