2011 Budget Is Solid But Unimaginative

May 20, 2011 - “There isn’t much to argue with in the 2011 Budget’s focus,” says Steve Thomas, a researcher at Maxim Institute. “It makes sensible steps to help increase New Zealand’s savings and investment, and to start reining in government spending and our growing debt. It's a ‘budget’ in the classic sense of the word—spending is tightened and anything that seems excessive, ill-targeted or unnecessary has been reduced. But at some point, we will also need to stop just adjusting the sums and ask some more hard questions about which areas ought to get funded at all. Unfortunately it is as though the Government has conceded this debate by simply trying to make things a little more affordable.”

“The reductions in KiwiSaver subsidies, Working for Families payments and tightening eligibility for interest-free student loans are all very positive steps. Targeting Working for Families towards the people who most need support is long overdue and more should bedone. Similarly, cutting down some of the burden that interest-free studentloans and KiwiSaver place on the government’s books is crucial, given the levels of international debt we have,” says Thomas. “Getting government debt under control is high priority so that future generations do not have to foot an even larger bill.”

“While this Budget cuts waste and starts to tackle some of New Zealand’s economic problems, a weakness is that the economy’s forecast return to health relies on such things as: the rebuilding of Christchurch adding to output from next year; continuing high commodity prices for New Zealand’s goods; and consumers spending and saving in the ways Treasury predicts. If the forecasts are offthen New Zealand could still be treading water in 2015 instead of enjoying the surplus the government is predicting,” according to Thomas.

“The cuts to government spending are positive but more is needed. We can cross our fingers and hope that Treasury are right and all goes well, as this Budget does, but ideally we should also rethink what the government ought to be spending taxpayers' money on. Over the next five years the government will continue to spend about a third of what the economy produces and tax revenue is still expected to be lower than spending over this period,” says Thomas. “Of the spending, about one-third will be on social spending. We will need to do more than just tighten the belt on the same old things in the coming years. We need to lay all thecards on the table again and get thinking about what the country’s overall spending priorities should be.”

Maxim Institute is an independent research and public policy think tank, incorporated as a charitable trust. For more details, see www.maxim.orgnz

ENDS

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