Even in a good year the parliamentary budget period veers towards the inane. This has not been a good year. There was the pay-equity revelation and its bracing C-word debate – and if you feel that the House seems more disordered and chaotic than usual, you’re probably right: the MPs increasingly use it as a platform for generating social media content, optimising for virality in a fashion that burns away any lingering shreds of dignity the institution still clings to.
Related to this is the privileges committee ruling on Te Pāti Māori’s haka protesting David Seymour’s Treaty Principles Bill, which aims to suspend them for three weeks. Was this unprecedented penalty a measured response to a party that sees Parliament as a platform for disruptive publicity stunts rather than a legislature? A racist overreaction? Or perhaps it was a cynical tactic to keep the political conversation diverted from the vexed topic of pay equity and/or part of a general strategy of allowing Te Pāti Māori to take up as much oxygen as possible so that they, rather than Labour’s front bench, become the face of a potential left-wing government?
Whatever the motive, the vote on suspending them was deferred until after the Budget.
No lollies
The pre-Budget period saw Nicola Willis sternly warn the nation that there would be no lolly scrambles in her Budget, before gleefully scattering half a billion dollars in film subsidies and $100 million into an investment fund to finance new technology start-ups. She also signalled changes to KiwiSaver and “carefully targeted cost of living relief” to be revealed on the day.
Government communications experts refer to these revelations as “rabbits”, that is, something they pull out of their hat to try to shape Budget coverage.
Media outlets prefer to frame the day in terms of winners and losers, and a cleverly designed rabbit is targeted at key voter segments that the government wants to capture. If they’re successful they’ll get a post-Budget bounce in the polls. This is the definition of a good Budget.
But there are also losers. Last year, that category included people with cancer the government had promised to help, but then didn’t. They spent the weeks after the Budget scrambling to put together a $600 million funding package for cancer medication. We might also question whether arranging the nation’s finances around ingenious media strategies rather than economic coherency is really the best thing for the nation.
Perhaps one of the deeper problems with New Zealand’s struggling economy is the bipartisan inclination to squander billions of taxpayer dollars every year trying to buy the support of key voter demographics. (Politicians have a ready answer to this criticism: the absolute best thing for the nation’s economy is for them to be in power rather than their opponents, so their self-interest is all in the name of the greater good.)
A tight spot
The weeks leading up to the big day brought two broad attacks on Willis’s fiscal direction of travel. To her right there’s a Greek chorus of economists who point out that the previous Labour government oversaw a substantial increase in the size and cost of the state, but no increase in taxes. To balance the books in the wake of Labour’s profligacy requires either spending cuts or higher taxes. But under Willis the government has cut taxes, and the last set of Treasury forecasts predicted only minute falls in government spending.
And that was before the coalition committed billions more to defence spending. A responsible right-wing government should cut, cut and then cut again.
Willis knows that reductions on the scale those economists are proposing would probably tip the economy back into recession just in time for the election next year, so she’s unlikely to take their advice.
To her left are the Greens, who released their alternative budget a week before the real thing – they’re trying to take up some of the policy and values space conceded by Labour, something they should have been doing for the past 18 months.
The Greens’ elaborate tax package acknowledges that the government is not paying for itself, so they proposed a suite of new and higher taxes on wealth, inheritance, mining, companies, high-income earners and private jets. But they also want an even larger state than the status quo, so they propose heavy borrowing on top of the new taxes.
Labour will refuse to indulge any of this in coalition negotiations: the larger left-wing party seems to favour some form of capital gains tax but that won’t come close to making up the spending deficit, so they’re happy to keep borrowing.
Both regard Willis’s refusal to match their spending commitments as austerity politics.
The debt problem
Our level of debt as a percentage of gross domestic product (GDP) is about average for OECD nations, but no one knows what level of government borrowing is prudent for a small, trade-reliant South Pacific nation that’s carrying an eye-watering amount of private debt for its wildly overvalued residential properties.
If there’s a sudden shock – pandemic, war, earthquake, climate disaster, financial crisis, prolonged recession – and the nation finds itself facing higher interest rates or a currency depreciation, the cost of servicing that debt could quickly prove ruinous.
It’s a question of risk. If we look at the world in the mid-2020s and ask, “How lucky do we feel?” The left seems optimistic, the right bleak and downcast, while the Finance Minister seems trapped in a state of deep ambivalence, running the economy via short-term media tactics because the future is too uncertain to do anything else.
