Thomas Pippos: Surplus just marker on journey

Successful economics are about enduring the distance. Photo / Getty Images

Opinion

Economic trends are largely going the right way because of a prolonged period of focus.

Rock stars conjure images of excitement, unpredictability and unorthodox behaviour - a relatively short tenure and connotations of excess. Potentially even an unceremonious end - a good time but a short time. They rarely stand the test of time. Hardly a fitting aspiration for our economy and certainly not an intuitive pairing with Bill English.

More appropriate but less colourful is the analogy of a champion marathon runner, with Bill English being their long-term coach. Why? Because successful economies are about enduring the distance, producing results over an extended period of time and successfully dealing with the inevitable shocks and the adversity faced during the journey.

The lens through which Budget 2014 should therefore be viewed is not about the surplus but about the journey.

Where the economy has come from and where is it going. Will it enable us to provide for the types of lifestyles we aspire to in New Zealand - more widely, to win against the others that we are competing against?

Through that lens, Budget 2014 should be viewed as a success or a relief, even by the most uncharitable.

The economic trends are largely going the right way as a consequence of a prolonged period of focus - setting a strategy and making deliberate decisions towards it.

Let's also not forget the reference period includes the economic turmoil that arose from the GFC, the resulting finance company collapses, and more recently, the devastation in Canterbury. There is also no sense that it will falter and may in fact complete the distance and finish well.

The actual surplus merely suggests that we are living within our means on the current expenditure and tax settings.

It provides the Government with options to reduce debt or spend more, without taxing New Zealanders any more. At an appropriate time surpluses also provide options for further tax reductions.

What's not to like with that image? Well it depends whether you look at it from the left or the right, and how far you are to the left or right from it.

Sure everyone always wants more and more quickly. But sometimes you have to be content with the present, knowing that tomorrow appears brighter.

The point is therefore not the anticipated surplus. That is no more than a marker along an economic journey, not a destination.

In terms of the next legs of the journey, Budget 2014 references both debt reduction and spending increases within the same tax settings. It sets the line in the sand upon which the current Government will square off in the coming election - the predictability of incumbency will be played off against the uncertainty of a change.

In terms of the new spending, the theme is around targeted expenditure in places where it can make a difference. A good example is the further investment in paid parental leave. Hardly a bad place to target additional spending as it goes to productivity, workforce participation and nurturing the growth of the next generation of New Zealanders.

Does this mean that the job is all but finished? Hardly, challenges still exist and there is always the risk of some form of future shock. What it does mean is that right here, right now we have a positive trajectory.

Ironically this also provides a greater opportunity for opposition politicians to leverage their platforms from than if conditions were more challenging.

Budget 2014 may not win the Government re-election but it won't lose it for them either.

Thomas Pippos is chief executive of Deloitte New Zealand.