The Budget yesterday was unashamedly political. In many ways it was a Labour of love; certainly for the party’s own faithful.
The invocation of Ruth Richardson and her 1991 Budget was designed to play well among them.
And just maybe, the Government might have hoped it would inflame National.
Instead in what was a more substantial Budget debate speech than we have seen from Opposition leaders since 2017, Judith Collins played to her own base with a call for more aspiration and less spending of “hard earned” taxpayers’ money.
She didn’t even rise to the bait of the nearly $1 billion of spending on Maori initiatives.
Instead she invoked John Key’s “ambitious for New Zealand” line and accused Finance Minister Grant Robertson of lacking ambition.
“The Budget is the time of year when hard-working New Zealanders look to the Government for hope and for a plan,” she said.
“They want some peace of mind that their tax dollars are being wisely spent, that the Government is investing on their behalf inn the things that will create opportunities, that will generate growth, that will help them provide for their own families.
“Perhaps this year, more than any, they are looking for signs of hope on the horizon. They’re looking for some sign the Government has a plan for growth.
“Instead, today what we saw is a Budget that’s light on hope and utterly lacking in ambition –that’s setting New Zealand up to fail.”
She was on shakier ground attacking the debt settings unveiled in the Budget.
“Our debt as a country is set to climb to $184 billion – more than $100,000 for every household.,” she said.
Collins carefully avoided using the Net-debt/GDP ratio which was down significantly on the Half Yearly Economic and Fiscal Update so that by 2025 it was expected to be 43.6 per cent rather than 46.9%.
That is some way off the ratio in the high 20s seen during the Key Government after the Canterbury earthquake but Covid has changed the way Governments look at debt.
Robertson yesterday was keen to offer international comparisons.
“Various countries report their net debt in different ways,” he told his media conference.
“If we compare ourselves to Australia using the way they report their net debt, their Budget last week showed it sitting just above 40 per cent in 2025.
“If we apply their measure to New Zealand, which basically requires incorporating the Super Fund in the debt equation our corresponding measure would be just under 25 per cent.”
The ASB Bank’s Budget commentary said beyond the five-year forecast period, “net debt continues to fall as a percentage f GDP, hitting 35.9% of GDP by 2029/30.
“This compared to 53.2% (2024/25) and 47.5% (2029/30) in Budget 2020.
“The return to outright surpluses still looks some way off. The longer-term Budget projections do not show OBEGAL surpluses until 2026/27 (2027/28 in Budget 2020.
“It will take much, much longer to get net public debt below pre-COVID-19 levels.”
But the Ardern Government has no appetite for the kind of austerity policies that would be required to bring that debt ratio back earlier.
“It is time for us to look at debt in more than just fiscal terms,” Jacinda Ardern said in her Budget speech.
“Decisions that we make, whether we choose to invest or whether we choose to cut, determine whether or not the next generation carries a social debt.
“Now, we saw the tendency of National Governments of old.
“The Budget in 1991 chose cuts; they chose user-pays, and they left a burden of debt that generations have carried for decades.
“We are still paying for that decision.”
That was Labour’s fundamental theme yesterday; that New Zealand had taken a wrong turn in 1990 (when the benefit cuts were actually introduced), and this was a Government that was going to reverse those policies.
This was a Labour Government looking back past leaders like Helen Clark and David Lange to Michael Joseph Savage and Peter Fraser for its inspiration.
Nowhere was this more evident than in the plan to have Dunedin’s iconic Hillside Railway workshops assemble 1500 rail wagons rather than import them already assembled.
Its announcement got prolonged loud applause from across the Labour benches.
Documents obtained earlier this month by the Otago Daily Times show that assembling the wagons in New Zealand using parts from Indonesia, China, Australia, the United States, and Italy would cost $219,800; $23,000 more than if they were fully procured overseas.
The subsidy would thus be $34.5 million for what the papers aid would be 40 to 50 new workers.
The decision redeemed a decision by Kiwirail in 2010 to have 300 wagons built in China rather than at Hillside, which was bitterly attacked by unions and local MP, Clare Curran.
In 2012 Hillside effectively closed only to be re-opened in 2019 with Provincial Growth Fund money. The Budget announcement would seem to assure its future.
Curran tweeted that the decision was “pretty damn good.”
“Gives our wee city a bloody strong boost. Win for local jobs. Win for flow effect to local economy. Win for sustainable freight and passenger transport. Win for our morale.”
But if the Hillside decision honoured Labour’s romantic past, there was also an announcement in the Budget that pointed to a new era for workers.
During the last Parliamentary term, the tripartite Future of Work talks between the Government, the Combined Trade Unions and Business New Zealand developed the idea of an ACC-type scheme funded by levies to provide income for people who had lost their jobs through.
The scheme would see workers retain about 80 per cent of their income for a period after they lose their jobs.
Robertson said that over the next few months, the Tripartite working group would be consulting targeted stakeholders on what the right settings could be, “balancing the support needed for Kiwis to find quality new jobs against the costs of running the scheme.”
The scheme has its origins in Robertson’s 2016 Future of Work report, which set out how to address security and change in the modern workplace.
CTU President Richard Wagstaff said these schemes were very common overseas.
“New Zealand is almost unique in the developed world in not having any income protection for workers who lose their jobs,” he said.
“Having a scheme that protects workers will remove some of the fear associated with redundancy and will particularly support communities hit by large-scale job losses.”
Wagstaff is pleased with the direction of travel of the Government with respect to unions.
“Together with Fair Pay Agreements and improved sick leave, this proposal could go a significant way to improving the industrial relations of New Zealand,” he said.
Even though BusinessNZ has been involved in the development of the scheme, Auckland EMA CEO Brett O’Riley sounded sceptical about it.
He said the scheme was something the EMA would welcome if it was structured correctly and only in place of four-weeks compulsory redundancy.
“It would need to include contributions from employees, employers, and the Government, though, otherwise it would add significant liability to the balance sheets of businesses,” he said.
Overall, the CTU welcomed the Budget.
“We particularly welcome the spending on improving income support which will reduce all poverty, including child poverty,” said CTU economist Craig Renney.
“ However, the Budget should have gone further to secure essential public services for New Zealanders and to deliver on the Government’s commitment to build back better.”
Renney said that lowering debt now meant that opportunities to invest were being missed.
He singled out the physical and social infrastructure needed for a Just Transition to a low-emissions economy is one area for investment.
“This Budget leaves many of the biggest challenges for future years but starts to make moves in the right direction.
“The CTU looks forward to working together with the Government to meet the challenges of Building Back Better.”
There were hints that the next Budget is likely to have a much greater emphasis on climate change.
There is a proposal to hypothecate the cash earned from the sale of ETS units for climate adaptation purposes.
Climate Change Minister James Shaw is saying this could generate $3 billion “in the coming years,” but the Budget Economic and Fiscal Update shows the sale generating about $600 million each year out to 2025.
There will be difficult choices to be made over the next year, largely as a consequence of climate change adaptation.
Some economic activities will be forced to shut down; workers will lose jobs. But Labour yesterday bought itself space with its own core supporters and in the process defined itself more sharply against National. That could preserve it from the kind of political turmoil that the 1987- 90 Labour Government faced when its base was faced with massive change as a consequence of Rogernomics.
As for National, they emerged from yesterday having held their ground. Not going backwards is a good day for them at the moment.