May is significant in the New Zealand parliamentary calendar, given the Minister of Finance delivers the Budget – a whopping $128 billion last year, over a third of our GDP.
This year Grant Robertson is riding a unicycle on a tightrope. The sugar rush is over but will he still reduce outgoings if it burns off voter support? His challenge is to boost the supply side of our economy, given he has inflated the demand side.
His Budget should incentivise exports, including weightless products from the gaming industry. Sadly, there is a misfit between Robertson’s ideology and the demands of resolving our current account deficit woes. His advisers already know the rating agencies are on the verge of downgrading our economy.
Our traditional drivers of foreign exchange face a tsunami of regulatory uncertainty. Whether it is RMA, fair pay bureaucracy or ETS reviews, there remains too much rhetoric shorn of reality.
Labour’s 10 Waters doctrine means the commandments won’t come from on high but from the local rūnanga. Any doubts, check out the Ngāi Tahu High Court case for the ownership of all water in the South Island. Fortunately, the iwi has yet to prove southern whakapapa to El Nino or La Nina and their recent liquid dumps.
Beyond Budget anxieties, we face a deeper spectre of fear and uncertainty. The Treaty of Waitangi has slipped its historical moorings; manoeuvred by a minority to spread divisiveness. This practice – escalated by Labour, the Greens and the Māori Party – has never been openly debated.
The upcoming Budget is guaranteed to feed this dynamic. Te Arawhiti, the Office for Māori Crown Relations, is the Treaty chocolate factory and needs to be melted. If the staff want to advance iwi, they should become truancy officers.
There are other cases of policies becoming unhinged. One should look no further than the Climate Change Commission, an organisation of economic muggles. Its name should be changed to Climate Adaptation because there is nothing our primary sector can do to change the weather.
The commission promotes cures worse than the malady. It is opposed to offsetting, sanguine about the declining forestry carbon price, and wants to shrink the farming sector and export jobs.
Fortunately, it does not have the powers of the Reserve Bank but both seem mad keen on engineering a recession. The Treasury needs to find more money to address the effects of Cyclone Gabrielle. Given the collapse of ETS revenue, this is unlikely to be a reliable source.
There is income that can be collected. Over 15 years ago, the Labour government introduced a tax break for returning Kiwis and new residents’ international investment income. Four years were offered to transition towards compliance. Rather than random missives to our wealth creators, start writing to such taxpayers and global citizens.
The banks are stupendously profitable and not required to pay a deposit levy as is the case overseas. The Reserve Bank says our deposit base is $425b. A tax equivalent of 25 basis points would net over $1b per annum. That would help to build hospitals.
Of course, the Aussie owners would threaten to pass this on to borrowers or take it from depositors. An obvious political reaction is to undertake a banking competition review, easily announced within a Budget, but Labour would rather have the exhibitionism of an envy tax.
Tackling wasteful spending, unproductive bureaucrats and red tape ought to be the backbone of the Budget. More borrowing threatens current debt sustainability, given our present liabilities and a spike in the cost of borrowing.
The inability of the Government to deliver has become a liability. The evidence is everywhere. Disastrously expensive projects at Te Whatu Ora, Te Pūkenga and Waka Kotahi abound. All of this, including the faltering Hawke’s Bay recovery, diminishes our international competitiveness.
The desertion of Cyclone Recovery Minister Meka Whaitiri drives home the point – not a fiscal deficit but an ethical one. The sun rises first in the east but, for Whaitiri and her new party, it shines only for those on the Māori roll.
Going forward, political stability matters. Subsidising electric cars, squandering money on Auckland light rail, and reckless Kāinga Ora spending have to be reined in.
Our political culture is at tipping point. The left is woke-struck. Kerekere means the great void, and the self-absorbed Greens believe bike lanes will address our economic situation.
Parliamentary co-governance between these parties and Labour, with its preoccupation with pronouns, means identity politics rather than robust economics will dominate. As international financial analysts pour over the Budget, a premium will be put on living within your means.
Memorable Budgets have great themes. This one should have the strapline of “work not waste, work not welfare, and work not woke”.
No more Te Whatu Ora describing women as “people who menstruate” whilst the health system crumbles. No more pie-in-the-sky renewable energy strategies while the lights are going out.
No more rash borrowing for follies like Lake Onslow, Tiriti-centric power sharing and 10 Waters – which will soon be 11 Waters given the rate of inflation.
