Budget 2020 Live Special: The Government will borrow an extra $50 billion in the June 2021 fiscal year to mitigate the hit from the Covid-19 pandemic.
Budget 2020: Comment
Anyone expecting Finance Minister Grant Robertson to produce a detailed plan for economic recovery from the Covid crisis was simply setting him up for failure.
The damage has not yet been counted so it is unrealistic to expect a detailed plan. We can't be sure if weat the middle of an economic crisis or just the start of one.
What Robertson has given himself and his Government in Budget 2020 is not a detailed plan but flexibility to deal with the ongoing crisis by setting up a $50 billion Covid recovery "fund."
About $30 billion of it has been committed by previously announced initiatives or new or expanded initiatives in the Budget, and there is about $20 billion left to play with.
Some of its measures are sensible such as extending the wage subsidy scheme but with stricter criteria, increasing funding to NZ Trade and Enterprise, boosting trades training and employment schemes, expanding lunch in schools programme.
The Covid Response and Recovery fund is not actually a separate fund but a way of organising expenditure, of putting some constraints around it and setting some expectations.
Treasury's forecasts of the economic impact are predictably grim with the current year ending in a $28 billion deficit and the following two years not much better as Government costs rise.
Debt is forecast to rise from the current $89 billion to an unthinkable $200 billion in four year's time.
It is not all bad. The operating deficit declines to just $5 billion in four years, a trend in the right direction.
But even Robertson is encouraging caution when interpreting the books.
The theme of Budget 2020 is "Rebuilding Together." Photo / Mark Mitchell
The trouble with trends is they are only as good as the forecasts on economic activity and as Robertson pointedly says in his Budget speech "economic forecasting is more of an art than a science at the best of times, but more so than ever now."
There is no question that he has delivered his third Budget with his fingers crossed.
The Budget is one of least overtly political Budgets in recent years and Robertson - as he has done recently - pays tribute to the economic management of predecessors Bill English and Michael Cullen.
His political messaging was based in nostalgic references to the role of the First Labour Government in responding to the Great Depression when, he said, "they built houses, rail and roads, they created the welfare state and a strong public health systems, and they backed shopkeeper and manufacturers."
"We are taking those principles into the modern era."
But of course the fund has political advantages.
It may be a pragmatic way to deal with such an uncertain situation but it also gives the Government flexibility for bigger spending commitments closer to the September 19 election – without being accused of overly political.
Prime Minister Jacinda Ardern yesterday announced part of Labour's campaign strategy - "a comprehensive engagement programme" to ask the country what the "team of five million" can do to get the country moving again.
National may try to portray Labour as a party without ideas. But Labour has options, and the Budget has just given them many more.
