It’s the skinny budget. Bill English has just put New Zealand on a permanent diet. Even his Budget speech is shorter than previous years.
If Government departments and public servants were feeling the pinch as this Budget was prepared, be warned: it will get tougher.
The Golden Weather is over.
It is pretty orthodox, and as I said probably almost wrote itself. It isn’t a budget for closing the gap with Australia, or seriously rejigging the economy. It’s the budget you have to have first, before you can get to grips with some of the other stuff . . . The consensus amongst most media in the lockup seems to be that there wasn’t much else the Government could have done.
But the big surprises are in the extent of delays to tax cuts and future contributions to the Cullen superannuation fund.
Tax cuts planned for 2010 and 2011 are on ice, and are likely to be repealed under urgency tonight reversing their passing under urgency last year. Goodbye the flagship promise from the 2008 election campaign, though ironically Labour’s key spending promises – Working for Families and student loans for instance – have survived.
In the Budget lock-up English said tax cuts were unlikely to be reinstated this term, and would only be back when forecasts were “magnificently better”.
With 10 years of deficits ahead, that is a promise on the never-never.
If tax cuts are on ice, the Cullen fund is in the deep freeze. A deferral was expected, but no automatic payments till 2020? That is one step short of cancelling it altogether and is a “mere” four elections away. Not so much a promise as soothsaying.
Do we reduce the living standards of the baby boomers and ensure there are jobs and standards of living for Generations X and Y. Or do we tax the earnings of Generations X and Y more heavily so the baby boomers can retire in comfort.
Bill English and John Key have deferred the decision in the hope that the economy will catch their hail mary pass.
But decisions delayed can often make the final decision more painful.
Pragmatism won through in Budget 2009, but we may all pay in the end if someone doesn’t confront our core problem at some stage in the next couple of years.
Our economy has too much government and its taxes are too high and in the wrong place. Until we change that structure to make us more productive, we will forever be stuck facing decisions about robbing Generation X Peter to pay Baby boomer Paul.
Bill English has dished up a budget which is a bitter pill wrapped in sugar-coating.
He has managed to scrape together enough cash to deliver more in the way of short-term sweeteners than had been expected, boosting spending on such things as hospitals, early childhood education, research and development and even a Prime Minister’s Science Prize.
Enjoy it while you can. Because there may be some jam after all today but its bread and water tomorrow and thereafter. English has judged that after nine years of a Labour spend-up it was asking too much for the populace to go cold turkey but the message is clear: it is belt-tightening time.
Fran ‘Haldol’ O’Sullivan:
. . . English knows full well he has been persuaded by cruel circumstances to deliver a (Socialistic) Budget that would have made his predecessor Michael Cullen proud . . . the Government is still funding Labour’s election bribes like the frankly extravagant Working for Families and the student loans scam.
I have to say I expected a bit more slash and burn than the Government has in fact delivered, and a quicker return to surpluses than the Budget documents actually indicate.
It took me quite a long while to get far enough back in the Treasury forecasts to discover that the so-called “decade of deficits” English railed against and in fact said was “unacceptable” is actually still there.
Yup, I’m not kidding. It’s difficult to find it, but way at the back of the document, Treasury admits that the operating balance will hit minus $9.6 billion in 2012 and is still not forecast to return to surplus until 2019.
If Budget 2009 was a tussle between English and Key over spending versus saving, I reckon Key won.
Fiscal hawk says: YUSSS! In yo face!