Liam Dann: Budget 2021: Why Grant Robertson won’t match big spending Aussies


This week’s Budget has no hope of pleasing everyone.

Maybe it will please no one.

At least that’s how it’s going to seem when the chorus of commentary rains down like dragon-fire on Thursday.

I don’t think Finance Minister Grant Robertson is about to deliver a terrible Budget.

I just think he’s about to be punished for delivering a sensible one.

It’s going to be moderate Budget.

Robertson is an extreme moderate.

He’s not going to spend big enough to make those on his left happy.

He’s not going cut spending enough to appease the debt worriers on the right.

He used the word “balanced” about a dozen times in his speech to business leaders last week.

He made a point of saying he would never apologise for his approach.

That’s a brave position to take right now.

In the US, President Joe Biden is dropping trillions of dollars on the recovery and the Australian government has just splurged, with one of the biggest Budget spend-up’s in history.

By comparison, Robertson is going to look tight.

He may be accused of austerity – something he deeply dislikes and rightly rejects.

This won’t be an austerity Budget, New Zealand will continue to run large Crown deficits this year and the next few years.

There is always need for more spending. There will be no shortage of voices to remind us of that on Thursday.

But I suspect Robertson is quietly running a line which has a deep underlying appeal to many New Zealanders.

Like the polite Kiwi tourist at an American breakfast buffet (remember those), he’s just having a little bit of everything.

And sometimes a little bit of everything adds up to quite a lot.

That’s how we roll in this country.

We’re a moderate people. We’re moderate to the max. We’re hardcore about moderation.

We’re extreme moderates.

It would be a mistake to underestimate how well the cautious, balanced approach to finance sits with most New Zealanders.

There are couple of reasons why Robertson can’t – or won’t – match the Aussie Budget largesse.

One – if I put my most cynical hat on – is that we’re further from election year. Australia goes to the polls next year.

It’s Politics 101 that you do the controversial stuff in the first year of your term.

Fickle, centrist, middle-class voters have short memories – you don’t chase them until you’re on the downhill run to an election.

But keeping the fiscal powder dry also makes sense in terms of where New Zealand’s economy sits in the recovery cycle.

Forecasts are for modest-but-not-great economic growth.

Closed borders and limits on immigration are flattering metrics like unemployment.

Business in almost every sector – including tourism – is complaining about labour shortages.

Until that’s resolved we have a heavy constraint on productive economic growth.

Pouring on excessive fiscal stimulus now will just stoke inflation.

There’s debate about how to resolve that issue: return to a high-immigration path or invest more in skills training and technology.

Neither solution is a short-term fix.

New Zealand’s economy doesn’t have the capacity to run as hot as Australia.

We have a proportionately smaller domestic economy.

Actually, it’s not clear Australia can afford to run a lot hotter either.

That’s one of the big debates about the Budget there right now.

Although the debate is a bit off-kilter, as it’s the conservative Liberal Party that has decided to go full Keynesian with the spending.

Perhaps it’s a reflection of a less moderate, cockier Aussie approach to life but they do have a habit of overshooting economic capacity with excessive stimulus.

After the GFC in 2009, Prime Minister Kevin Rudd committed all his substantial surplus to two stimulation packages.

He put about A$10 billion straight into consumers’ pockets and A$42 billion to a range of initiatives from infrastructure projects to home-insulation upgrades for all.

In New Zealand, Bill English went with a balanced approach, albeit one that ran closer to the austerity line than Robertson will.

I guess the relative success of post-GFC recoveries is open to debate … but it was an Aussie economist that dubbed New Zealand the “rock star economy” in 2013.

Neither Australia nor New Zealand has the capacity to stimulate like the Americans with their enormous domestic economy.

There will undoubtedly be some big, new spending packages in this Budget.

They will likely target child poverty and those suffering most from inequity.

There’s a moral imperative for that and there is economic logic.

Financial gains for those at the bottom of the social ladder don’t get invested in property speculation or Aussie holidays. They get spent locally.

And of course, anything that lifts people out of the poverty trap pays back longer term in lower health, social welfare and justice-system costs.

Business people get this. They won’t be complaining about government spending to help the poorest.

Business groups are gearing up for bigger battles about structural policy issues like employment law and immigration.

So when it comes to Budget battles it seems Robertson may have a bigger problem on the left.

The traditional Kiwi finance minister’s mantra has been that we must be fiscally cautious to cope with the next crisis that will inevitably come our way.

Robertson needs to remind New Zealanders that there is need for caution to cope with a crisis we are still living through.

There will be time for more spending when the path out of the pandemic is more secure.

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