Finance Minister Grant Robertson argues the economy is in transition, from population-based growth to productivity-based growth.
The government wants to deliver greater fairness with prosperity and its priorities are:
• Reducing child poverty through the Families Package.
• Meeting his self-imposed Budget Responsibility Rules. Robertson sees these as an important discipline
• Dealing with infrastructure deficits
Robertson is an engaging speaker. He's placing weight on meeting his self-imposed Budget Responsibility Rules and, so far, it looks like he's on track.
Well-being and living standards
"We want to measure success in the economy differently."
Robertson wants to improve the well-being and living standards of New Zealanders through sustainable and inclusive growth, not just headline numbers.
In a recent speech, he explained further: "This means moving beyond narrow economic indicators and measures of success, and instead puts the well-being of our people and the environment at the centre."
The BPS gives weight to the Treasury's Living Standards Framework – which focuses on "wellbeing" through "four capitals" – natural, human, social, financial and physical. Robertson calls this work "world-leading".
The challenges for Robertson and Treasury will be to move beyond general statements of goodwill towards putting some substance behind his ambition.
Before Budget 2019, Robertson wants to report on the Living Standard Framework.
My sense is of emerging clarity on how the government intends to redistribute income, and on the values it will apply when assessing "fairness", but with much lesser specificity on addressing our collective lack of productivity.
A fairer pie perhaps, but a larger pie would also be welcome.
Business confidence and risk
Since the government took office, business confidence has slumped to levels not seen since the Global Financial Crisis. ANZ's latest Business Outlook survey finds a net 39 per cent of businesses pessimistic about the year ahead, the lowest level since early 2009, and a decline of 29 points in a single month.
Treasury Secretary Gabs Makhlouf argues this effect is likely to be short-lived. It's hard not to feel sympathy. New Zealand's economy continues to grow steadily. I see nothing in today's data that would support such a dramatic shift.
Lack of confidence can itself be an issue: businesses postponing investment, deferring recruitment decisions and lenders becoming more risk averse are all factors causing future growth to decline.
The Families Package is front and centre to Robertson's announcements today. He calls it a "major signature piece" for the new Government.
My attention was caught by a tweet from Opposition Finance Spokesperson Steven Joyce: "Labour will legislate this week to take $1060 off average wage workers from 1 April next year. Deeply ironic that a govt whose stated aim is to lift wages starts by cutting them."
Is Joyce correct? That depends on whether you start with existing tax payments (in which case the Families Package will not reduce incomes) or existing law applicable only from April 2018 (Joyce's argument).
What's beyond dispute is that the Families Package money is extraordinarily well targeted at groups the government wishes to support.
He's placing weight on meeting his self-imposed Budget Responsibility Rules and, so far, it looks like he's on track.
The package is a bold statement of intent.
It does not, though, fundamentally change the building blocks of Working for Families or the Accommodation Supplement.
Working for Families is a complex scheme. Its annual focus does not sit well with the ever changing requirements of today's working world and shifting family structures.
Could the Government carry out a more thorough review of indexation rules, work requirements, payment mechanisms and its impact on child poverty?
Government debt inching towards 20 per cent of GDP
Simultaneously with Robertson's Budget Policy Statement, the Treasury has also released its Half Year Economic and Fiscal Update (HYEFU for short).
HYEFU is just as upbeat as its pre-election cousin (PREFU).
In per capita terms, the economy has grown little this year (0.6 per cent per head).
Treasury's predicting an uptick in this per capita figure to 1.7 per cent by 2019, driven by the KiwiBuild, the Families Package and increased student allowances.
Secretary to the Treasury Gabs Makhlouf highlighted in his comments risks around capacity constraints and productivity before this gain can be delivered.
Shifts include an upwards tick in New Zealand's public debt projections, with Government debt predicted to fall below 20 per cent by 2022. There is little margin for error. By comparison, PREFU projected the 20 per cent target to be achieved by 2020.
The growth projections pose particular challenges.
PREFU forecasts assumed above trend GDP growth, briefly rising to as high as 3.7 per cent in the June 2019 year. The new high point is little changed at 3.6 per cent, but with above trend growth being sustained for longer.
Could Treasury have placed more weight on risks around productivity, capacity constraints, net migration, business confidence and global migration?
Given Robertson's commitment to fiscal sustainability, he will face some tough choices in meeting policy priorities while keeping debt under tight control. Even so the government's books remain in good shape.
Budget 2018 will see if he can continue to square the fiscal circle.