Budget Day 14 May 2020

 We think that we can safely say that Budget 2020 is the most important Government budget for at least a generation.  Forget about Black Budgets, Mother of all Budgets, or Wellbeing Budgets.

This is seriously serious.  A massive $50 billion recovery and rebuild budget and seven years of deficit.  $14 billion already spent and $20 billion in a kitty for spending yet to be identified.

So where to start?  First, perhaps we should say that the Government almost certainly introduced some Budget changes early, as a part of the response to Covid-19 (that’s the $14 billion).  That was smart – things were ready to go, so “go early” makes sense.  Many planned budget announcements have been “put on ice” replaced with new big hitting projects and plans.  Others are likely to be given a “new name” and a “new purpose” but were always on the cards – support for the Racing Industry anyone?  And there will be a lot of approving or affirming funding already agreed from the Provincial Growth Fund (PGF).

There is a lot of “bailout” money.  Who knew that the Racing Industry Transition Agency (RITA) couldn’t pay its bills and needed $26m?  Hospital and Health funding will naturally be front of mind and pocketbook ($3.92 billion over four years announced pre-budget), but where are all the skilled employees, additional clinics, operating rooms and specialised equipment coming from?  This is where money ain’t enough.  Underfunding in our health, housing and education sectors in the past has created the need for a rapid catch up – it makes sense to pump money in there.

Underfunding infrastructure has arguably been around for quite a while – nothing new there, but the sudden change of mind by the current Government suggests that they know “shovel-ready” projects are about infrastructure.  Hopefully we still have private firms, contractors and employees with the skills to pick up the shovel. 

To read a summary of the announcements click here.  Below is a snapshot of some announcements, and our general commentary on the bigger picture. 

Nothing for households, but a housing initiative including more social housing and rental support.  No tax reform or tax cuts.  No further increase to benefits (over the recent increases).  Boost to core infrastructure, “recover and rebuild” is the order of the decade.  New interisland ferries and port infrastructure, rail networks and rail stock are examples of this investment. 

Unemployment expected to peak at 9.8% by September 2020 (160,000 more unemployed) returning to 2019 numbers by 2023. 

The economy is expected to shrunk by 1% within 12 months. 

“A one in one hundred year threat” (Grant Robertson) has triggered this significant budget.  Budget deficits for the next seven years and our debt out to 53.6% of GDP by 2023.  $190 billion dollars worth of Government borrowing through Government Bonds.  This is a long debt burden but we can use our strong balance sheet.  Mr Robertson gave recognition to previous finance ministers Bill English and Michael Cullen for getting the Government’s books in such a healthy state (a rare cross political compliment).   

The lions share of funding for business is a new targeted wages subsidy, where businesses have a 50% drop in revenue, and a drop in the bucket of $316 million to NZ Trade and Enterprise to assist exporters.  Possibly a disappointment for many.  A lot of targeted funding is a sector wide support package, such as tourism who will get funding for advertising local travel and retain core tourism assets. 

Commentary

New Zealand is a small country, and we need to think small but smart.  Investment in education for at least a decade will be required to prepare the current and next generation of worker bees to be ready for the future, whatever that looks like.  This includes the building industry, medicine, teaching, public law, IT, science, humanities, social services, technology, and manufacturing.  By raising the education of everyone, we will put ourselves in the best place to compete and live in a global community.  Trades and apprenticeships is included in this budget with $1.9 billion targeting in particular building skills for social housing.  Funding to rapidly retrain tourism and aviation staff into the primary sector and targeted fees-free training are all positive spending.  And a separate $1.1 billion package has been set up with the aim of creating almost 11,000 jobs in the environment sector from pest control to wetland restoration.

Relying on overseas suppliers for even the most basic of materials or products could have seen New Zealand in a dangerous place during Covid-19.  If local manufacturers (who are few and far between) had not switched to developing and producing PPE and hand sanitiser, we could have been stuffed.  If motels did not step up and take in the homeless (yes, Government did fund it) we could have had an even worse social situation than the annual winter homelessness crisis.  If hotels did not agree to house and feed thousands of quarantined returnees to New Zealand (again paid by us taxpayers), we would have had a significant problem and insufficient camper vans to hold them.

If the Government had not fast tracked signing on to the Job Seeker benefit, lifting benefit levels, changes to family assistance rules, the wages subsidy, Government backed loans, carrying tax losses back and support for charities assisting out of work migrants (who cannot access benefits) we could have expected a much worse social and economic crisis. 

But on the other hand, there have been some missteps.  Keeping so many Government Ministers out of the decision making or at least out of public eye makes this Government look like it had a very small decision bubble.  And that means fewer voices with different perspectives.  How can we have confidence in the decision making if so many Ministers appear to be out of the loop?  Which makes you think that their senior civil servants were also, maybe, out of the advisory loop.

Introducing and passing legislation that is different to the draft released is a serious and embarrassing mistake.  Fast law is never good law.  Releasing over 300 government papers on a Friday afternoon does not endear any Government to the media, especially since these were important Covid-19 decision papers.  Making announcements or implying one rule and then changing the position does not go down well.  Level 2 details continue to change, the Government should come out and say this is Level 2.8, 2.6 or 2.4.  It was never going to go down well to tell a family they had to have a “family” funeral of no more than 10 when shops, restaurants, schools, bars, gyms and hairdressers could open.  Few have a “family” of under 10.  In our view, if the Government had not increased this to 50 there would have been widespread disobedience.  In this non-religious country, prohibiting the right of people of faith to attend a worship service of more than 10 people will not attract too much attention nor concern.  But the Government needs to carry the goodwill of the public with it.  Funerals, tangi, weddings and church services don’t carry much economic benefit nor votes but are hugely personal and intimate experiences.  It does not wash for the long absent Minister of Health to point to funerals, weddings and church services as transmission points of major outbreaks across the globe, justifying these decisions.  We could equally point to one airline Cabin member infecting dozens at an Invercargill wedding, because Health Officials didn’t think international crew needed to be quarantined (even though their passengers were); or to the High School that had one of the biggest clusters; or the pub that held a St Patrick’s Day party.  Based on this logic, international Flight Crew should not be permitted to go home, Schools would remain closed and pubs will not open until Level 1.  One has to wonder if sporting events were prohibited whether sports-mad New Zealanders would have been quite so passive!

If the Ministry of Health had not been successfully challenged on its decision (to not exercise its statutory obligations to consider discretion on family visiting the dying) would we still be in that place?

And this is the problem – we have granted too much power to (non-elected) Health advisors and not enough to other considerations and voices including the media asking fair and reasonable questions, the opposition questioning decisions, social and charitable agencies at the front line raising issues, and businesses providing ideas and suggestions.  In case you missed it, it was Ministry of Health advice  to leave (read “abandon”) New Zealanders to their own devices overseas and refuse them the right to return – a clear breach of their civil rights and probably New Zealand law!   The independence of Parliament and the Courts are more important than ever.  We cannot put all our trust in a Government that changes its mind and message (others might say listens to the public) while having ministers give conflicting advice; nor total trust in our Health Sector when staff are infected just doing their job due to poor PPE practices; nor the Police who thought they could trial civil rights breaching technology without consent but now have the right to enter private homes without a warrant.  

We are entitled to our health, to expect the Government to make the right decisions for the benefit of all of us, and for our civil rights to not just be acknowledged, but to be respected and protected. 

Ending on a high 

That said, well done Team New Zealand (all 5 million of us, Jacinda Ardern, Ashley Bloomfield, Grant Robertson, our medical workers, cleaners, supermarket workers and freight companies included) in getting us to a place where we now have the luxury of having an open(ish) society and the right to question decisions past, present and future.