Political journalist Thomas Coughlan chats with Finance Minister Grant Robertson about today’s budget. Video / NZ Herald
For former finance minister Bill English, the only good budget in times of economic crisis was a boring budget.
Excluding those who pushed people to use online calculators to work
on how much they got in tax cuts, the English indulged in sensible budgets, not much to see here without flashy gimmicks and lollipop jamming.
And he made an art form of convincing voters that boredom was exactly what they had always wanted and needed.
But again, English was not struggling with falling polls.
The question Finance Minister Grant Robertson will now ask himself is whether the lavish part of his budget – cost-of-living payments – will be enough to make his ballot headache go away for a while.
One of the nicknames the National Party gave to the budget was a “band-aid budget” – a budget that was little more than a band-aid for the cost of living problem.
It’s an accurate name for that, and not just for the reasons National says.
The cost-of-living package in the budget was designed as a band-aid for labor surveys rather than the household budget.
That poll fell apart like a well-aged cheddar and National and Act hacked it with the cheese knife.
Their concerted campaigns on behalf of the so-called “inner circle” had taken hold and expectations were high.
Robertson’s first attempt to tone down expectations by saying inflation spikes would be a short-term problem failed miserably – and left him with little choice but to muddy something about the cost of living for the budget.
It also meant he had little choice but to target middle-income people – or at least some of them.
There you have it, the cost of living payment for employees who received less than $70,000 last year was born. This will last three months – a period that Robertson said was to allow the “storm” to subside. Robertson is now in a game of chicken with inflation – hoping the truck will at least slow down before payments run out and being asked what’s next.
It is far from certain that Robertson will win.
Obviously the cost of living package was a late addition to the budget plan – the Treasury had to tinker with its analysis in a hurry.
In this analysis, the Treasury recommended that the billion dollars go to low-income people as part of a program to combat child poverty. His reasoning was that the same amount of money would have much more impact there, rather than being dispersed among employees.
It’s not often that the Treasury is the one preaching the Labor gospel as the preferred option and it falls on deaf ears at work.
But the opposition parties had succeeded in making the “narrow middle” a force that could not be ignored without appearing deaf to the needs of the voters – and therefore arrogant.
Robertson’s cost-of-living package was more about making it look like the government was responding than actually responding.
The cost of living payment will give those who earned less than $70,000 enough to buy 9 liters of gasoline a week for three months.
It gave Labor the headlines it wanted for at least a day.
Headlines after the budget’s release focused on the cost-of-living element of the budget, although it was overshadowed by the $11 billion spent on health.
That won’t displease Robertson. Whether or not people think it will make a big difference, it at least looks like the government is responding to their pain.
But his political advantage may be as short as the package itself. Those who don’t understand will wonder why. Those who get it may be disappointed.
In the old days, before Covid-19, something that cost $1 billion in the budget was a big deal. But the conga line of zeros at the end of dollar signs in the last two Covid-19 budgets has spoiled us in this respect.
Nor will it do much to end the chatter about tax cuts as an alternative, longer-term way to ease the pain.
Many are already wondering if Robertson did enough or could have done more.
Whether he should have done anything is a different question.
The payment of the cost of living ended up taking all the attention of the budget.
Robertson might have gotten more political traction had he instead stuck to his guns and kept health as the centerpiece. He would have needed a compelling story to go along with the $11 billion, more compelling than the health reforms – but rather what those reforms would actually deliver.
A budget doesn’t need to have direct donations to win with voters if it draws its weight elsewhere.
This year’s budget should have been called the Arrears Budget – and flowed like cash into government services in which massive arrears have accumulated over the two years of Covid-19. These cover services ranging from hip surgeries to courts and coroner services.
The longer these backlogs persist, particularly in health, the more problematic they will become for a government.
But one of the reasons the government cannot afford tax cuts or more household support can be seen in the rest of the budget. The government spends a lot and it is not immune to inflation either.
Much of the $11 billion spent on health care will disappear almost immediately simply as cost increases.
And National will be watching every penny.
It is often not how governments spend the millions that determines confidence in their financial management, but how they spend the pennies.
No one will be able to claim that more should not be spent on health or education.
But National’s goal will be to point this out and convince people that the government is wasting their money.
The budget measure will not put an end to the chorus of the National and the law for more movements for the “middle in a hurry”. This will last as long as inflation lasts. Things won’t get cheaper anytime soon.