Former Finance Minister Sir Michael Cullen says he lost a debate about the 2008 election. Photo / Doug Sherring
The only certainty in tomorrow's Budget is uncertainty in a sea of red.
Certainly, no recent minister has faced so much uncertainty as Grant Robertson as he prepares to deliver the Budget in the midst of the Covid-19 pandemic crisis.
Not all crises are equal. New Zealand was still weathering the effects of the Asian financial crisis when Winston Peters presented his 1998 Budget on May 14, but he still posted a $1.3 billion surplus.
Michael Cullen's 2008 Budget took in some effects of the global financial crisis although it quickly worsened after the Budget and before the change of government that year.
And National took in not only the GFC but two Christchurch earthquakes as well, which took the deficit from about $6 billion in 2010 to $18 billion in 2011 and gross debt grew by about $20 billion over two years.
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Nobody expects to see a surplus this year, except possibly on the distant horizon.
Former Deputy Prime Minister Sir Michael Cullen, who delivered nine Budgets for Labour, predicts it will be a strange Budget where the numbers will be very uncertain and there will be a large contingency available in the ballpark of what might be required over the next two or three years.
But he explains the problem Robertson has.
"We don't really know where the ballpark is at the moment," says Cullen, who recently resigned from boards to fight a battle with cancer.
Cullen says there is much more uncertainty in this crisis - whether there will be second and third rounds of the virus. The Budget will have been prepared some weeks ago and have been overtaken by events.
He does not believe Robertson has to show a path to surplus yet.
"I don't think people will care about that at all."
Robertson had been consistent with his own practice and been cautious with Cabinet colleagues.
"During the good times…you don't let them have the full rein that they would like on spending. You run surpluses. You reduce debt as a percentage of GD. It allows you to sustain a substantial expansion of debt when some kind of crisis comes along."
Cullen also said the way that business had lined up for the Government support on offer meant "nobody could possibly argue for a return to neo-classical economics as the basis for fiscal management in New Zealand".
"That mask dropped. When the need came who did everybody turn to? It was yet again the state and the Government."
The height of the global financial crisis came under Cullen's watch, just before the Labour Party campaign launch in Auckland for the 2008 election. They got confirmation that day of rumours that Australia's Kevin Rudd had made a unilateral decision to provide an open-ended guarantee to the financial sector.
"As soon as he did, we had to do it," said Cullen. "We had no choice, otherwise everybody was going to ship their money to Australia."
He quickly consulted National about it and got the party on board. He remembers sitting in the green room with Helen Clark, who changed her speech before the launch.
He had already lost the debate with Clark about how to approach the 2008 election. He had wanted to campaign on who could manage the downturn in the fairest way and make sure that the pain was going to be reasonably equally spread.
"Helen was always of the view that the most optimistic person won in politics."
And, similarly now, people wanted to see hope from the 2020 Budget.
"I think people are looking for assurance, looking for the Government being in control of what it is doing," he said.
"They want to know probably that there is going to be a little bit more normality about processes from here on.
"It's the old hope thing. It's what Helen was really on about in 2008. People want to see some hope in this situation. Doing that [this year] is far more challenging than it is in the vast majority of Budgets."
In the short term, Cullen said, the economic recovery would largely be carrying on with what was being done before.
"You can't suddenly change the structure of the economy in the space of weeks although I think there has been some rather dream-like statements coming out of some quarters in that regard."
Steven Joyce, part of the triumvirate with John Key and Bill English who ran National's 2008 - 2017 Government, is also sceptical of the talk about the crisis meaning big changes.
At the margins there would be change, such as greater online retail and working online.
But they were trends already in place which had been accelerated through the process.
"But the suggestion we are heading to a brave new world where everybody does everything differently is highly unlikely and potentially a bit damaging."
It was entirely a human reaction to reassess after a massive shock, such as the Christchurch earthquake, to see how things could be done differently.
"But when it comes to a finance minister doing a Budget it is important not only to treat those things with caution, because they do pass - that desire to start again with a clear sheet of paper - but to think about it in terms of what consumer demand will be like and how will it really change."
The other thing to consider was business confidence.
If you started saying everything was going to change "you risk creating further problems with confidence because you are musing about further major policy changes".
For example, the suggestion that New Zealand might go back to a Ministry of Works would not give the civil engineering and contracting industry the confidence it needed to recover quickly and bounce back post-Covid.
Joyce believed there needed to be three spending priorities this Budget: supporting businesses, education and health.
Joyce said there was an obligation to continue to support the thousands of businesses which had taken a hit on behalf of society through lockdown and which were part of New Zealand's economic infrastructure.
"I think there are both an economic and a moral responsibility," he said.
As well as business, education and health, Joyce said Robertson needed to show a path back to surplus.
"You have to do the things you need to support; you have to offer some confidence and some understanding of what it will mean to build back and you have to start to show a path back to surplus."
He said you had to acknowledge this was a point in time and that Treasury projections would change, but by the end of the forecast period and into the projection period you had to show some strongly improving sets of accounts.
"And the things you choose to spend money on need to be things that are demonstrably needed.
"I don't think there is massive room to be political in spending."
That was the other side, he said. The Government was given a lot of leeway in a crisis to put politics aside for a time.
"But the flip side of that was that you can't be too political yourself.
'You have to be very cautious about taking decisions that don't look absolutely necessary in a time when you have spent a lot of time telling people you are going to be borrowing a huge amount of money in order to get New Zealand back on its feet."
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