A ‘rolling maul’ of support or a multi-billion dollar slush fund: views on the New Zealand budget have been shaped by the election looming in just four months.
With an election due on September 19, Jacinda Ardern’s government decided to hold its budget as planned on Thursday, rather than kick it down the road as Australia did.
The result was the announcement of a funding envelope rather than the funding itself as Finance Minister Grant Robertson attempts to maintain an agile response to COVID-19.
A $NZ50 billion ($A46.5 billion) COVID-19 Response and Recovery Fund was the centrepiece, but its operation is confusing.
The gargantuan fund does not include $NZ12.1 billion of stimulus announced in March, but does include the $NZ13.9 billion announced since then.
It also includes $NZ15.9 billion within the budget, but Treasury declined to detail which projects had been included as some have not been announced.
The balance of the fund, $NZ20.2 billion, is yet to be allocated, as Mr Robertson seeks a pool of money to draw down from as the economic fallout from COVID-19 shakes out.
“It is a once-in-a-generation budget. The task we face is monumental,” Mr Robertson said, using his favoured rugby analogy to explain his task to Kiwis.
“Today’s announcements are part of a rolling maul of government support.”
Central to Mr Robertson’s strategy is containing joblessness.
Unemployment is scheduled to peak at 9.8 per cent in the September quarter – election time – necessitating wage and business support packages in the short-term.
But in the budget lockup on Thursday, Mr Robertson said that whole amount may not be spent this year, or even next year.
However and whenever the funding is spent, it is historic.
Total new spending announced by this government soars to above $NZ74 billion ($A69 billion) when combined with the $NZ12.1 billion ‘New Zealand Upgrade’ infrastructure works of mainly road and rail projects announced in January – which at the time Ms Ardern called a “once-in-a-lifetime” investment.
For context, New Zealand governments tend to announce around $NZ3 billion of new spending at budget time.
All of this spending will see New Zealand saddled with debt which is on track to reach half of the country’s GDP by 2023, and $NZ200 billion by 2024.
New Zealand’s opposition leader Simon Bridges has issues with that.
“That is $80,000 per household. A second mortgage for New Zealanders that this Budget brings in,” he said.
“And we know that as part of that $NZ140 billion is a $NZ50 billion COVID-19 Response and Recovery Fund. Sadly, a $50 billion dollar slush fund is not a plan for jobs and growth.”
Mr Bridges’ characterisation of the entire pool as a ‘slush fund’ did not go down well, given that’s the funds are providing much-needed small business support and wage subsidies to curb unemployment.
Still, economists were cautiously optimistic.
Westpac called it “the right response” but “being bold is risky (and) could saddle future taxpayers with onerous debts”.
ASB Bank chief economist Nick Tuffey labelled it “more stimulatory than anticipated” and suggested overly-optimistic growth projections beyond 2021 might give rise to spending cuts the government has so far not contemplated.