John Armstrong: A matter of balancing the sweet and sour

Prime Minister John Key. Photo / Mark Mitchell

Why more and more often do ministers decline to be interviewed on Radio NZ's flagship Morning Report?

The answer is National believes it gains nothing. It believes the programme's audience is one with fixed and inflexible views. It believes the audience is largely of centre-left persuasion. It believes Wellington-based public servants are a significant component of that audience.

Given National believes the public service is a lost cause politically, it is no great surprise that a fair chunk of the "savings" in Thursday's Budget will come from that quarter in the form of job cuts, judging from John Key's hints yesterday.

The Government will not direct departmental chief executives to cut staff. But it will set targets for savings. Given departmental budgets have hardly been increased since 2008, the only means of reaching those targets will be further staffing "reviews".

Key loves to talk up this Budget as "balanced". It certainly involves striking a balance - one that balances the need to chop back Bill English's record $16 billion deficit with this being election year.

It is a bit like cooking sweet and sour pork. Get the mix of sugar and vinegar "balanced" and the result should be digestible for most people.

Thus the reduction in Government contributions to KiwiSaver accounts will be offset by Treasury predictions that growth in wages and jobs will outpace inflation in the next two years.

Unless you are a Wellington-based public servant. In which case - presuming you keep your job - there is no money for any salary rises and anyway, according to Key, you did more than all right when Labour was in power while private-sector wages struggled to keep up with inflation.

Having so blatantly signalled there will be significant wage growth - Key says between 4 per cent and 5 per cent would be "an educated guess" - the Prime Minister should start praying every night the Treasury forecasts prove to be reasonably correct.

The cost of living is shaping as the one election issue that might derail National. The reason it has yet to become a red-hot political issue is that Opposition parties - like the Government - do not have any ready solutions beyond subsidising such things as winter household power bills.

Much else hangs on the accuracy of Treasury's forecasts in the Budget - notably that its expectations for economic growth are born out and tax revenue picks up and the Government is thus able to stick to the "credible path" back to Budget surplus that Thursday's document will detail.

Interviewing Key in London late last month, The Economist magazine observed his mission was to convince Kiwis that taking an austere approach in election year was the right one.

So far National has been able to convince people austerity is required.

This has helped the Government's efforts to portray the Budget as "responsible" rather than it being seen as political because contributing factors to English's record deficit - the Christchurch earthquakes, the collapse of South Canterbury Finance and so on - have been outside the Government's control.

By talking up forecasts of wage and job growth ahead of Thursday, Key has injected politics right back into Budget Day sweet and sour.