Bill English's eight budget ticks boxes here and there, but it will be remembered in history for its complacency and the missed opportunities it represents

Perhaps the most defining feature of Budget 2016 is quite how political, rather than financial, it is. There are numerous aspects of it that only make sense if you place the fact that there's an election in 18 months front and centre in your thinking.

That's why for me this is "the Prequel Budget". Or, to borrow from John Key, it's "kicking the can down the road". This is a budget that does nothing much of anything but attempt to keep pace with rapid immigration, and even doesn't succeed in doing that.

Sure, the general approach is sound as far as it goes. Schools and hospitals get more money. Perhaps the most visionary elements are the money for science and innovation and the bowel cancer screening programme (the first time New Zealand men get cancer screening). 

But it's hard to describe those schools and hospitals as "winners", as they have been in some media, when they're getting less per student and per patient.

Finance Minister Bill English's own framing of the budget was that it was a 'catch up' budget; he brought forward $600m from 2017 to spend on basic social services because of our rapid immigration growth. Yet the increased spending is not keeping up with population growth. We're still behind.

And that's the problem across the board. As Duncan Garner said yesterday, if you don't maintain the car, somewhere down the road it starts to splutter. You skimp in the short-term and it costs you more later. After eight Budgets, in which there have famously been two zero budgets and otherwise tight new spending caps of $1 billion per year, government services are starting to splutter.

Health, education, Conservation, universities... the list goes on. The 'doing more with less' mantra can only work for so long.

Perhaps the most drastic example of that spluttering is in housing. National has tried all sorts of packages and prods to get Auckland house prices under control and what's patently clear is that it's not enough. Average prices are going up $1400 per day in the past two months, the gap between population growth and house builds is growing. English has even admitted that while a street of houses is being built in Auckland every day, a street and a half of people are moving in.

So, again, we're still behind.

And now that has meant people falling off the bottom of the renting ladder. The lack of spending on housing has led to people sleeping in cars and marae and perhaps even churches opening their doors to the homeless.

This all goes back to what Bill English likes to call "responsible fiscal management".  

What's most remarkable about English's conservative approach -- and so frustrating for New Zealand -- is that it comes at a time when the price of government borrowing is cheaper than ever. As I've written on this site since 2009, the GFC and the world's economic woes present a huge opportunity for a country that's a little better off than most to make hay. This is an historically good time to borrow and build.

Yet in his pre-Budget speech English said:

"The capital spending allowance - which is for one-off investments in infrastructure and other public assets - will also be lower than previously signalled to allow for more debt repayment."

And he was true to his word. At a time when Auckland in particular is crying out for infrastructure, English is cutting infrastructure spending. Instead, he's paying down debt. This is conservatism in the extreme.

That decision has massive ramifications for all those first home buyers and people living in cars, for those waiting to get on the waiting lists for healthcare. It's effectively asking them to wait. Just hang in there.

National seems to b gambling that big surpluses are just around the corner and that will give them the fiscal headroom to play catch up later. Or, to use that headroom on tax cuts so that people decide they don't need that per capita spending catch up. 

The biggest problem with the prequel budget is its complacency; there's no urgency. It puts things off for another year; election year.

Comments (6)

by Stewart Hawkins on May 27, 2016
Stewart Hawkins

You hint at a major problem for NZ and that is the short election cycle. Every budget is a prequel to election budget if the election is less than 3 years away. If there is one change I would make to instill a sense of planning into government it would be a 5 year cycle. National continue to bury their heads in the sand regarding Chinese immigration/property buying (there are a very, very large number of cashed up Chinese still to come....) in Auckland as well as allowing huge tax benefits for property investors. Bill English doesn't have the imagination to tackle any of the major issues of the day which require political will and initiative so he does what he does best, play a straight bat fiscally and hope Key and the smart men in National can think of something positive to do.

by Katharine Moody on May 28, 2016
Katharine Moody

And now that has meant people falling off the bottom of the renting ladder. 

Here we have a family of seven living in a sleepout which caught fire;

Wonder how much they were paying to rent the place? What is the law in terms of penalties to persons making profit out of illegal accommodation I wonder?  That said though, such illegal accommodation (sheds, garages and sleepouts) has become our unofficial, official solution to the housing crisis. You won't see the National government calling for prosecutions, that's for sure.

It's becoming painfully embarrassing to be a well fed and comfortable New Zealander... I feel a bit like what I imagine white South Africans have felt like for decades. The only option to try and suppress the sickness in my stomach every time I watch one of your stories on the crisis, Tim, is to try not to think too hard on how cold and hungry and desperate so many kids really are - and to thank my lucky stars that none of my grandchildren are in this situation... yet - becuase we need to be very clear - nearly every middle income NZer is likely only a few paychecks away from being impoverished.  

by Tim Watkin on May 28, 2016
Tim Watkin

Katharine you should see Mike Wesley Smith's latest:

It may make you sadder than ever, but...


by Tim Watkin on May 28, 2016
Tim Watkin

Stewart the interesting thing is that every political party agrees with you. I once asked on TV where all the parties stood and was surprised they all agreed. But they also all agree the public would punish any government that lengthened terms.

by Fentex on May 28, 2016

. If there is one change I would make to instill a sense of planning into government it would be a 5 year cycle. 

Bad, bad idea. then you get a government that spends a long time unaccountable. And the inverse of your complaint - that governments are always making budgets with a mind towards election - would occur, governments making budgets with no worry about re-election divorced form the nations position.

National would have been empowered to be more extreme for three odd years in reducing expenditure (which is their ambition, to permanently decrease the governments expenditure) and then motivated to up spending just before the election.

But worse than that, because in the modern world governments budgets don't change much (we seem to have reached a bit of a consensus in roughly how it's done) is the other issues.

In NZ a big policy change is never far from an election and therefore accountability to the electorate. That is a good thing.

by Katharine Moody on May 29, 2016
Katharine Moody

Yes, Tim - saw it this morning. It prompted my comment above. What kind of society are we?

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