Thought for this Day: Budget Politics
Keith Rankin, 25 May 2015
After watching TVNZ's Q+A yesterday – especially the Bill English interview and the ensuing panel discussion – I realised the full political significance of the Budget.
The issue of 'achieving a surplus' is political because it reflects the widespread popular belief – amplified by the
mainstream media – that government achieving a financial surplus is not only important but is even more important than
other achievements. The quest for surplus has taken precedent over addressing unemployment, inequality and environmental
unsustainability.
Reflecting this popular view, National in 2011, in receipt of projections from Treasury and others that the economic
cycle would of itself bring the government Budget into surplus mid-decade, saw it as an opportunity to take credit for
something that would most likely happen anyway. Labour then said 'we too'. (Grant Robertson made it clear to me, on TV3's The Nation, that Labour continues to prioritise the government's Budget balance over other objectives.) Both parties adopted views
that were framed by the mainstream media. Only National is trying to unshackle itself from that framing.
The problem for a government wanting to take credit for something that it believed would happen anyway, is that it had
to be seen to be actively pursuing that goal, rather than merely sleepwalking to surplus. (When you let the media frame
the political discourse, politics becomes substantially a matter of managing 'optics'; ie perceptions.) Those spending
cuts have been damaging, completely unnecessary, and most likely counterproductive in that GDP (the tax base) today is
below projection largely because of those cuts.
To lay rest to this particular bogey, National has gone for a big push to achieve a surplus in the 2015/16 financial
year. The economic cycle will turn down in the year after that. Thus all the carrots in the Budget are timed to take
effect from next year. But all the sticks take effect immediately.
In Gallipoli, 'one big push' at Chunuk Bair and before you knew it the Anzacs would be in Constantinople! The key point
of this Budget is that it's the one final big push for surplus. It's 2015/16 or never. Unlike Constantinople, this goal
may be achieved. And, if achieved, it will take this particular fiscal monkey of the National government's back,
allowing priority to be shifted to more meaningful objectives.
In the meantime, while government is not borrowing, huge amounts of structural lending from businesses and households
must continue to go as new debt to the speculators, to the poor and to the young. (See my Zero-Sum Financial Reality on Scoop on 19 May 2015, last week.) On TVNZ News last night this intensified lending to the poor was this apparent in
the item about Door-to-Door Loan Sharks.
A key part of National's smoke and mirrors on the surplus is the removal of the Kiwisaver 'kickstart' payment. I'm all
in favour of this because, as I noted in my 19 May article, we should not be stimulating the savings culture that feeds
today's speculative debt. Here I note, simply, that when a $1,000 Kickstart was previously 'paid' to a 20-year-old
signing up to Kiwisaver, that money would be immediately returned to government as a 45 year interest free loan. Smoke
and mirrors indeed! This is purely an exercise in accounting optics.
ends