Comment: Budget 2020 will be vital to the rural sector, especially after Covid-19, writes Federated Farmers Vice President Andrew Hoggard.

I've been thinking ahead to next week's Budget and what we need from it as an industry and as a nation.

Without doubt Budget 2020 will be the biggest in a generation. Recent budgets have mostly been bland, boring affairs but Covid-19 has changed all that.

The virus and the Government's response have had significant short-term economic impacts, including a deep slump in GDP and a surge in unemployment. The fiscals have been slammed and it's anyone's guess how big the deficit will blow out to.

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Although GDP will bounce back as restrictions are eased, the global economic downturn will exacerbate the impact on New Zealand and will be a headwind the recovery.

It will take considerable time to make up the lost growth and even longer for unemployment to return to levels before the virus struck.

The economy will continue to undergo a great deal of realignment even as it recovers, with many businesses and consumers facing an uncertain future which will impact on investment and spending.

Farmers have been able to carry on farming through alert levels 3 and 4, and we're very aware of the privileged position that placed us in.

I'm glad farmers have taken their responsibilities seriously and it's good that most haven't needed support measures like the wage subsidy scheme.

That said, it hasn't all been plain sailing, especially for those affected by the severe drought who have found it extra hard under lockdown to reduce their stock numbers.

There are many farmers out there who are quietly doing it tough in their isolated bubbles.

Farmers and indeed all businesses, large and small, need to see from the Government a way forward and a way out of the Covid-19 hole.

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As attention turns to kick starting the recovery, measured and responsible short to medium-term measures to support and stimulate the economy are very necessary, not just to get things moving again, but to set us up for the future.

Lockdown has emphasised to me the importance of connectivity. When Grant Robertson and Shane Jones open their infrastructure cheque book, what we need for rural New Zealand is a substantial boost for better connecting our rural communities to themselves, to the rest of the country, and to the world.

Rural broadband and cellphone towers desperately need attention.

Although great progress has been made over the past decade there are still many rural areas with poor-to-nonexistent broadband and cellphone coverage. If agriculture and rural New Zealand is to reap the economic, environmental and social benefits of better technology then we need a kickstart to close the digital divide.

We also need more investment to improve and better maintain our rural and regional roads, both state highways and local roads and bridges.

Federated Famers Vice President Andrew Hoggard. Photo / Supplied
Federated Famers Vice President Andrew Hoggard. Photo / Supplied

These economic and social lifelines are crucial for our physical connectivity but have been suffering years of neglect. The drought has also shown the pressing need for more and better on-farm and community water storage connectivity, which properly managed has proven economic, social and environmental benefits.

Rather than imposing new heavy-handed environmental regulation the Budget should signal more funding for weed and pest control, environment enhancement projects, and catchment groups and funding to help councils with their huge looming costs to address drinking water, waste water and stormwater problems.

We strongly support initiatives to boost workforce skills and measures to re-train workers who have lost their jobs and can be redeployed to where the jobs are, including into agriculture.

Getting back up to the big picture it will be vitally important for the Government to focus on providing a more positive business environment to give existing and new businesses much needed confidence to invest and employ.

The Government can do this by keeping its spending controlled and focused on good value-for-money future investment, by keeping the tax burden down, by fostering competition and open markets, by ensuring low and stable inflation, and by seeking to improve the quality of regulation to reduce compliance costs.

The Budget should reinforce the importance of these critical enablers. It would be much more inspiring for confidence than establishing heaps of committees and signaling a state-directed interventionist approach to economic management, an approach which has been tried and failed.

The Budget should set out a credible road map to a return to sustainable fiscal policy.

I believe this can be achieved through restraint in operating spending and pursuit of value for money, aiming for return to operating surpluses within five years. A growing economy would then reduce elevated debt levels as a percentage of GDP without the need for new or higher taxes which would stifle economic recovery.

A return to sustainable fiscal policy would also enable the Reserve Bank to unwind quantitative easing, which would help restore monetary policy to normal.

It would also reduce the risk of its operational independence being eroded, which could undermine low and stable inflation which has been a key pillar of economic policy.

Although there's much uncertainty what is certain is that the future normal will be different from what we've been used to.

Whether it is better or worse will be influenced by decisions made in the Budget.

The stakes are high.