Budget's fizz escapes in early unbottling

By VERNON SMALL

The Budget's sweetest offerings are being unwrapped well before next Thursday, in an extravagant extension of the leaking and releasing that became de rigueur under Bill Birch.

In the past, this strategy was used to prevent small but significant announcements being overshadowed on Budget day.

In the case of Michael Cullen's first Budget the reasoning is somewhat in reverse - to prevent some of the bigger spending announcements (the arts package is a case in point) overshadowing the big day.

The downside of that is a scatter-gun impression - a "lolly scramble," as Act's Rodney Hide dubbed it. The Budget proper will need to draw together the strands and give them coherence.

The sub-text of the Budget will more than usually focus on the messenger himself. There is a pressing need to rehabilitate Cullen's reputation in the face of suspicion and hostility from his key business audience that are in danger of affecting the economy.

The rash of early releases will leave the Budget focused on two themes in particular: that the Government and its fiscal track are business-friendly and that all efforts are being made to close the economic and social gaps between Maori and Pacific people and the rest of the nation.

The "gaps" measures will contain some impressive levels of extra spending across the board; in education, health, information technology, training schemes and even a smoking cessation programme.

Other elements aimed at the population at large, such as the move to income-related state house rentals, will be meshed into the package.

A key component will be "capacity building" to give Maori trust-type set-ups the ability to administer their own funds.

That helps explain why Prime Minister Helen Clark was so keen to audit services which are contracted out in the wake of the Waipareira Trust controversy.

The irony of this shameless pre-Budget headline-hunting is that we still treat the document itself as sensitive writ, to be unveiled only under the strictest secrecy.

The legends of Budgets past had queues at petrol stations before a midnight tax hike or smokers stocking up on cheap fags before they were socked in the hip pocket.

These days we hear of the tobacco tax hike weeks in advance, while fluctuations in the dollar and the machinations of oil exporters make petrol price changes a weekly event.

So while reporters and analysts will be studying the document ahead of its official release, we already know the cost of the housing package, the extra spending on biodiversity, the big boost to arts funding and that traffic cops will be re-introduced.

By Budget time we will also have seen restorative justice and victim support measures, to name a few.

On the supposedly "market sensitive" forecasts, we know the growth profile and that the fiscal track will be slightly better next year than the $1 billion forecast in the March Budget Policy Statement and significantly up on the forecast for the next two years.

All of which amounts to a no-surprises package (give or take a freeze on student fees) that will fit the Government's imperative - or should that be obsession? - to mop the fevered brow of business.

The decision to release details of the "goodies" in the Budget was planned long before the recent crisis in business confidence, but the need to focus the Budget more tightly has since become sharper.

Cullen's own performance will also be under the spotlight as he tries to rehabilitate his reputation.

He has insisted there be no label, like Ruth Richardson's Mother of All Budgets, but will instead emphasise the theme of a new century, a new start.

To complete the three-week strategy - two weeks of pre-announcements and one week of post-Budget charm offensive - ministers and backbench MPs will be fanning out across the country to sell the message in as many factories and boardrooms as possible.

Part of that message is for business not to resist change unreasonably and to remember that Ruth Richardson was sacked by Jim Bolger and that successive elections have rejected Rogernomics. Politicians must set policies that are acceptable to the people as well as to local and overseas investors.

But the Government will be making a strategic mistake if it thinks the business confidence issue is the only one it faces.

As National's Bill English has astutely observed, there is a growing band in middle New Zealand facing higher costs, while superannuitants and the worse-off will be getting specific assistance from the Government's initiatives.

Middle-income household budgets, which under the previous Government received a regular injection of tax cuts, have suffered from the rises in petrol, tobacco and interest rates with a small countervailing effect from policies such as the cut to student loan interest rates.

Sure, the Government is confident the transition in the economy from booming cities to solid growth in the rural areas and hinterland is well under way.

The National Bank's survey of regional trends is due for release on Monday and will certainly underpin how quickly the service and retail-dominated city economies are levelling off while the lower dollar and the good growing conditions have boosted the hinterland.

But as English points out, that is not the heartland of Labour's and the Alliance's vote. If the city economies slow sharply, pressure will mount to deliver more tangible benefits to the Coalition's voters. The first Budget of a new Administration always carries the onus of defining a Government's direction.

Cullen needs to convince middle New Zealand, as well as business, that the Government is on their side or the electoral damage will be long-lasting.