Gareth Hughes: Budget challenge is to deliver wellbeing for today and tomorrow

Tuesday, 16 May 2023

Grant Robertson delivers surprise $4 billion 'reprioritisation' and outlines spending intentions of 'no frills' Budget.

Gareth Hughes is a former Green MP, and works for the Wellbeing Economy Alliance Aotearoa. He is not a member of any political party.

OPINION: Grant Robertson may have been watching the weather very closely last week as Auckland declared yet another state of emergency just before the Budget was sent to the printers.

This year’s Budget has already been impacted by the costs of extreme weather and previous Budgets were totally re-written by Covid. Robertson has experience responding to a crisis more than perhaps any other minister of finance.

True to form, this Budget will again be framed by crisis – inflation and the cost of living.

He has promised a “no frills” Budget as part of the “bread and butter” focus on the basics.

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Gareth Hughes: “He [Grant Robertson] has promised a “no frills” budget as part of the “bread and butter” focus on the basics.”

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Politically, this Budget is critical for Labour. Soon we will be in the hurly-burly of an election campaign and with the polls incredibly tight, it’s one of the few remaining big agenda-setting opportunities.

Voters have overwhelmingly identified cost of living as the most important malady they want addressed but there’s no consensus on the remedy. The problem for Labour is that there are no easy answers or simple solutions.

Robertson could directly transfer money through a new cost of living payment or a meaningful tax cut for low-income earners but that could be inflationary, prolonging the pain imposed by the Reserve Bank. On the other side of the coin it could cut spending, aiding the inflation fight, but this would further increase the likelihood of a recession and a rise in unemployment. Taxes on the wealthy recycled to vulnerable households has been voluntarily taken off the table.

From the luxury of opposition National and ACT can promote sweeping tax cuts, slashing the public service and cutting two regulations for every one proposed without consequences. Gimmick policies like sending out millions of individualised tax receipts aids Labour’s attack line that National’s economic policies are lost in a Bermuda Triangle of lower taxes, increased spending yet lower debt.

In the real world, the Government has to make difficult choices in challenging times; but it’s important to remember the wider picture.

After the Covid shock the Government’s books are now on track for a surplus, spending is tracking towards the long-term average and debt is low compared to similar countries.

The last time inflation was at this level was in the early 1990s when the unemployment rate was twice as high as it is today and for Māori it was over 20%.

The Government’s economic fundamentals may be relatively healthy but the country’s social and environmental fundamentals are still poor.

Gareth Hughes: ‘’Whānau Ora is a successful example of letting those who know their communities best get on with the mahi and it could be replicated many times over.’’

Modern budgets are like the dance of the seven veils, with a succession of pre-announcements and so far Robertson has revealed nearly a billion dollars for cyclone and flood recovery, funding for 300 new classrooms and a $300m top-up for the Green Investment Fund.

In politics, it’s often wise to under-promise and over-deliver and with this one framed as a “no frills” Budget there is plenty of scope to do the latter.

Robertson has genuine room to move and address social and environmental deficits with $4b in savings to spend this Budget and with low debt levels.

The biggest challenge may be delivering on the immediate crises without forgetting the longer-term systemic ones.

Inflation has just exacerbated how hard it is to live in New Zealand for many. We work some of the longest hours for some of the lowest wages and pay some of the highest costs of living in the developed world. The housing market is still broken for all but the wealthy or intergenerational wealthy and the supermarket duopoly, electricity gentailers and Aussie banks continue their profligate profits. Child poverty is still a massive unresolved social failing – after some progress it has now dropped from view.

Climate change is perhaps the best example of the long-term being held hostage by the short. It was climate policies and an effective carbon price that were sacrificial lambs thrown on the new prime minister’s policy bonfire.

That was all about keeping the carbon price low for corporates and consumers, freeing up government cash to reprioritise elsewhere and sending the signal that the Government is focused on today’s problems and not distracted by tomorrow’s.

With only a modest amount built so far on the foundation of the Zero Carbon Act there’s only so much pruning you can do before there’s very little left.

The Greens secured money for their Green Investment Fund in a pre-Budget announcement but that won’t satisfy their base. Deeply unhappy that the government rejected the advice of the independent Climate Change Commission, crashed the ETS auction and has been taken to court by Lawyers for Climate Action (again), Green members might wonder what’s the point of being in the tent if it’s your policies crackling on the campfire.

Robertson’s sixth Budget is beset by both immediate and long-term crises. He can deliver more than bread and butter but the big challenge is to deliver wellbeing for people and planet today and tomorrow.