Finance Minister Grant Robertson doing the traditional pre-Budget showoff of the Budget documents yesterday. (But how did they turn out to be blue?)

The Prime Minister all but launched her-re-election campaign yesterday.

In a speech in the Beehive Theatrette, she said that  In the coming month the Government would launch a comprehensive engagement programme that would  pose a simple proposition.

“Look what our team of 5 million achieved together in beating the virus, now what can we do together to get our economy moving again, to look after our people, and rebuild in a way that makes things better than they were before,” she said.

And as for the Budget today: “Our number one priority is jobs. That means this will be a jobs budget. That means doing all we can to support people staying in their current job or move to a new job if needed.”

POLITIK understands that will mean substantial funding being directed towards retraining schemes such as the proposal put forward by the dairy industry to train up farm workers.

National was equally forthright in where it thought the priority should lie.

Opposition Leader Simon Bridges targeted the Prime Minister during Question Time about the level that debt as a percentage of GDP was expected to get to.

Citing comments from economist Cameron Bagrie at the Covid-19 Epidemic response Committee yesterday morning, bridges suggested the Government was planning to take on an additional $100 billion of debt.

He called it an “economic blizzard” which was going to be against the next generation?

And thus the ground has been set; Labour will focus on jobs; National will focus on the cost to future generations of paying back the debt.

That will be the focus of the Budget debate later today.

Beehive officials have already told NGOs and industry groups that they would prefer they didn’t focus on line-by-line items in their reaction to the  Budget today but rather left the space clear for the Government to talk up the big numbers.

Those numbers, however, are likely to be all over the place.

The Reserve Bank Monetary Policy Statement yesterday agreed that unemployment was going to rise.

“Persistently lower economic activity will cause some firms to lay off staff over the coming year<” it said.

“The unemployment rate could rise significantly and employment fall well below its maximum sustainable level.

“However, lower labour force participation and fewer new migrants due to the border restrictions could affect labour supply and mitigate part of the rise in unemployment.”

The Bank is forecasting a slightly lower unemployment rate for the March 2021 year (7.4 per cent) compared with Treasury’s “Scenario One” forecast of 8.1 per cent – but that difference might be explained by Treasury’s being for the June rather than March year.

Otherwise Treasury and the Bank are broadly in synch expecting unemployment to drop to near six per cent in 2021/22 and 5.5 per cent in 2022/23.

The Bank sees the big GDP drop happening now with a forecast fall of 8.4 per cent in the March 2021; the Treasury forecast sees GDP falling by only 2.5 per cent for the June 2021 year.

We will get updated forecasts today and they will form the basis of the debate between Labour and National.

But data published last night by the OECD shows how the Covid-19 virus is forcing millions out of work in North America.

Data for April  shows very strong rises in  unemployment in the United States, to 14.7% (up from 4.4% in March), the highest level since the series started in January 1948, and in Canada to 13.0% (up from 7.8% in March).

In both countries, the rise reflected the surge in the number of people on temporary layoff.

But rather than opt for temporary layoffs, Ardern made it clear Labour will borrow to stimulate the economy to keep people in work.

And she revived one of the themes of the last election campaign by suggesting that her opponents would cut spending.

“The first thing you will notice, is that we believe when times are hard, you don’t cut – you invest,” she said.

“We will run the ruler over every line of expenditure, no question we need to ensure our expenditure provides value for money and supports our primary goal of jobs.

“But the notion that at this time of need we would make cuts to the essential services so many New Zealanders need more than ever is not only immoral, it is economically wrong.”

 At the committee Bagrie, however, focussed on the big numbers.

They were going to be “absolutely terrible,” he said.

Deficits in excess of 30 billion next year, government debt issuance of more than 40 billion next year.

“I think any government then is going to be in excess of one hundred and eighty billion at the end of the projection period.

“Now we’re doing the right thing, laying off the government balance sheet in the near term.

“But boy, do we have one hell of a fiscal repair job that we’re going to need to undertake.”

Bagrie said he wanted to see some signs that the Government was prepared to make some hard decisions.

“And that includes spending being reprioritized and some sacred cows need to be put on the table,” he said.

“The retirement age is going to need to have to go up at some stage.

“And Kiwibuild, that money needs being redirected to Housing New Zealand. I want to see signs that there will be a pragmatic economic plan as opposed to an ideologically driven one.”

He may be waiting in vain.

the Government is now going to more than double the debt to GDP ratio.

“I defended the surpluses we ran in our first two budgets on the basis that we needed to prepare financially for a rainy day<” said Ardern.

“Well that day has well and truly arrived and we are ready for it.

The Government’s ability to borrow, at very low interest rates, places us in a strong position to weather the economic storm ahead.

“But more than that we are well-positioned to use our balance sheet to shelter New Zealanders from the worst impacts of the fallout and in doing so protect jobs and help grow our economy. “

The Prime Minister said the Government’s plan was to invest.

“By investing we will create jobs and get the economy moving again. Just as a rising tide lifts all boats, a growing economy supports us all – and allows us to bring the Government books back into the black.

“This is not the work of just one Budget. It will require relentless focus on growth and jobs, and not growth for growth sakes – but in a way that acknowledges we have challenges to our environment, to our wellbeing, that we can also use this time to also help resolve. “

But there will be more to today’s Budget than simply the economics.

Two MPs face particular challenges.

Simon Bridges must produce a Budget debate speech that convinces his caucus he can lead them through the election. The jury is still out on this.

And NZ First Leader, Winston Peters, has to support the Budget at the same time as he distances NZ First from it if he is to have any hope of pulling votes off Labour during the election campaign.

Ultimately, the Government holds most of the cards on Budget Day. All the Opposition can do is warn of the potential downsides.

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