The fiscals
May 20th, 2010 at 3:24 pm by David FarrarThe $1.1 billion cap on new spending has almost all gone ($800m) on health, education and science. Most agencies have a nil increase. Over four years DHBs get an extra $1.4b.
A stronger economy (economic growth is so vital) means we are predicted to return to surplus by 2015/16 and net debt peaks at 27.4% in 2014/15. That is welcome but only will happen if fiscal discipline is maintained. Also if we have a recession every ten years or so (which tends to happen) then that only gives us a couple of years of paying off debt before we may face similar problems again. The reality is that there may not be significant extra funding for anything until around 2017.
While this is better than the disaster inherited by the Government (net debt projected to never peak), the reality is that net debt is still going to increase from $27b this year to $63b in 2014. On average that is still an increase in net debt of $175 million a week!
GPD is now forecast to grow 3.2% in the year to March, up from 2.4%
The operating deficit for this year is projected to be $8.6 billion. Now does someone want to try telling me that the Government should be spending even more money? It is clear we need less spending, not more.
In what is overall a very good budget, this is the weak part. The deficit is still too high, and another fiscal shock could still stuff up us badly. It would be nice for the Government to set a target (as a % of GDP) to which they want to get spending under. I think 30% is a good target to aim for.
Related posts:
- Obama’s Budget
- Fiscal Discipline pays off
- How bad is Labour’s legacy
- Crown accounts to 31 March 2009
May 20th, 2010 at 3:31 pm
Well plenty have been saying cut out the wasteful spending for a long time now. Has it happened Hell no. We are still going on borrowing just not as much. And i will predict that the savings that Govt reckon they are going to rake off companies and property investors with a couple of houses will dissappear in no time once the lawyers and accountants get to work. I will also predict a resurgence in the cash economy.
Vote:We will keep junk machinery longer rather than invest in new and therefore our productivity will go backwards again.
No great leap just rearranging the deck chairs once more.
May 20th, 2010 at 3:40 pm
It doesn’t matter what long term goals the current government sets. Labour will eventually be voted back in and reverse it anyway – probably on a platform to do just that. Being responsible and constraining spending just increases the extra goodies Labour can offer each election.
Vote:May 20th, 2010 at 3:52 pm
30% may be a good target – 25% is better, where are the reductions in govt spending to pay the debt downquicker/lower borrowing requirement???????
Vote:Ben binding referenda will stop that and could even keep liabour out of power permanently if adopted whilst National is in power and heeding the wishes of a majority of taxpayers and at a 25% spending cap that would be very likely.
May 20th, 2010 at 4:05 pm
is the growth rate the actual rate (ie net of inflation) or the gross rate?
Vote:May 20th, 2010 at 4:07 pm
Great coverage of the budget DPF — better than Stuff!
That’s the weak point of the budget — too much government spending. I hope in the years to come that John Key and the boys continue to chip away at welfarism and a sense of entitlement that many New Zealanders have.
We need less government, more personal and family and community responsibility. Otherwise we will end up like Greece.
Bring back good old Kiwi self-reliance!
Vote:May 20th, 2010 at 4:12 pm
Good enough budget.
On the 30% – is that core govt spending, or all govt spending (including local govt). Does it include superannuation? It’s hard to set a target without being quite specific about what it covers. I’d personally like 30%, but it won’t happen in NZ any time soon.
Vote:May 20th, 2010 at 4:37 pm
@freethinker, why so positive about binding citizens referenda? It seems to me they’re only good if you’re on the side of the majority, as Switzerland’s Muslims found out with the referendum banning their marinets. Tough luck if you’re not in the majority and I would suggest that, with the important minorities in NZ, there are a fair number who couldn’t hope to often be.
It seems to me there’s little, in terms of freedom and liberty, that can replace constrained government. A cap of spending would be an important part of that.
Vote:May 20th, 2010 at 5:19 pm
Hell I just fell asleep listening to Mr Irrelevant (Goof) speaking on Radio Live. Does he send anyone else to sleep as soon as they hear his voice?
Vote:May 20th, 2010 at 5:23 pm
Um, any budget that’s not balanced is a bad one. People (apart from students) don’t generally borrow money to fund day to day expenses, and if they do it’s only for a little while (eg after losing a job), why is the government borrowing money to fund their day to day expenses, on the hope that their income will increase to the level of expenditure in 2014? It is not a smart way to run a household and not a smart way to run a government.
Vote:May 20th, 2010 at 5:42 pm
There are two elections to be fought over this period, and I suspect that National’s heartfelt desire to continue to rule us will give rise to profligacy. Again.
Vote:May 20th, 2010 at 5:43 pm
Gazzmaniac, I think I’d make a distinction between govt spending that is there year in year out, and that spending that is because of a downturn. To give a simplistic example, when we have a downturn we get more unemployed people. That obviously costs the government more. I don’t think it would be a great idea to cut govt spending in other areas so as to pay for this unemployment cost – I’m OK with us averaging welfare spending over the long term.
The main problem here is that we locked in some very wasteful spending in the boom years, rather than building up any decent savings. That means that we can’t easily average out.
Tax revenues are a similar story – they drop during a downturn, and rise again quite quickly when the recovery comes. If you try to balance every year instead of over the longer term, you create an unholy mess. And again, the previous govt assumed that boom taxation revenue was just the new base, and spent it all.
We need a way to lock some of this in so that governments can’t just spend it. With unemployment, one way is to convert it to a genuine unemployment insurance scheme, instead of being just a govt expense. Since that would be prefunded with proper premiums, it would average out automatically – spending wouldn’t spike when unemployment goes up short-term.
I wonder if there’s a way to do something similar with tax revenues – maybe Treasury or Reserve Bank could have the job of determining the 5 year moving average tax revenue, and then the government had to base their budget on that, instead of on this year’s tax take. Sounds kind of funny, but might force some discipline.
Vote:May 20th, 2010 at 5:43 pm
Property effects.
Vote:Generally ok for Mums and Dad’s.
May 20th, 2010 at 9:00 pm
What a sweet beautiful deficit of $8 billion. Oh how lovely would it be for Ireland to have that.
Over here they have done €4 billion in cuts ($8 billion NZ), and have promised another €3 billion next year and the year after that. The plan is to have a deficit of 3% of GDP by 2014 (2009 – 14% deficit)
Last year borrowings were about €19 billion and they forced through TWO pay cuts for civil servants. (they called one a pension levy). Although they did cut the tax on beer!
Already Ireland has borrowed in advance €20 billion in case the markets lock up.
It is nice to have a NZ passport to fall back on if the worst comes to the worst.
Vote:May 20th, 2010 at 9:15 pm
Nice to see rising expenditure on health etc (about to be partially clawed back by the GST rise) but where are the cuts???
Somone please tell me we’re no longer paying for the Families Commission, or any Ministry ending in “Affairs”? Or pointless quangoes like the BSA et al? Please???
Or has Blinglish indicated he’s okay with the tradition that every government needs to have some nice cosy sinecures to which to appoint its mates, and the diplomatic service can only stretch so far?
Vote:May 20th, 2010 at 9:28 pm
Borrowing more and running a high deficit for at least another 6yrs in a volatile world market, hopefully predicting a return to surplus by 2016 is optimistic. It only takes another recession to come along to tilt as further in debt. And that could be anytime. I don’t believe this recession is over and may well reamerge as other economies are still printing money to try and stay solvent. A financial calapse for one or more of our trading partners on top of more spending well dash any hopes of a surplus. I guess the bright side is if that happens then it would be fair to say other economies will be worse off than us.
Vote:Other than that a budget worth comending. Thumbs up.
May 20th, 2010 at 10:30 pm
Unless we get that growth- if oil spikes, Australia pulls back on its growth, commodity prices stagnate or interest rates increase more than anticipated, the revenue is simply not going to be there. Its a really risky strategy.
Vote:May 20th, 2010 at 11:15 pm
PaulL – you suggest an unemployment insurance scheme – great idea, allow people to choose to pay into a government welfare fund or a fund of their choice. Shit, even allow them to underwrite themselves, which is effectively what most people do because the dole is so difficult to get if you have assets and don’t lie to them. At the very least, people should be able to take the cost of income protection insurance off their tax.
I think now would be a great time to cut government spending. Get rid of some of the commissions that do nothing but spend a ton of money and you’ll go a long way to balancing the books. A proper assessment of what the role of the government actually is, and what state bodies are actually necessary would be a pretty good idea too.
Vote:Government spending is higher now than it was in 2000 and the country was ticking along quite well then. Why not seriously look at undoing everything that Labour has done. It would require a single piece of legislation called the “let’s undo the last ten years act” and could be passed under super duper urgency like the last rise in tobacco tax.
May 20th, 2010 at 11:28 pm
For gazzmaniac and others who are wishing the government would get it’s costs (ie our spending) under control, here a list of commision[ers], councils, departments that you and I pay for… and which I’d like to put in font of a taxpayer jury.
Some should be gone completely. Others should have some of their functions traneferred before they’re stopped. Others require serious makovers. I’m not holding my breath.
1. Broadcasting Commission
2. Charities Commission
3. Children’s Commissioner
4. Earthquake Commission
5. Electricity Commission
6. Families Commission
7. New Zealand Fire Service Commission
8. Health Sponsorship Council
9. Human Rights Commission
10. KiwiRail Holdings Limited (yes, a fire sale required)
11. Local Government Commission
12. Te Taura Whiri i Te Reo Māori (Māori Language Commission)
13. Maori Television
14. Mental Health Commission
15. Ministry for Culture and Heritage
16. Ministry of Social Development (Keep, but rename ‘Ministry of Essential Welfare’ and re-task accordingly)
17. Ministry of Māori Development
18. Ministry of Women’s Affairs
19. Ministry of Youth Development
20. Ministry of Pacific Island Affairs
21. National Advisory Council on the Employment of Women
22. New Zealand Game Bird Habitat Trust Board
23. New Zealand Fish and Game Council
24. New Zealand Quality College
25. Drug Free Sport New Zealand
26. New Zealand Teachers Council
27. New Zealand Walking Access Commission
28. Ngai Tahu Ancillary Claims Trust
29. New Zealand Artificial Limb Board
30. New Zealand Film Commission
31. Office of Ethnic Affairs
32. Plant Variety Rights Office
33. Public Sector Training Organisation
34. Real Estate Agents Authority
35. Registrar of Unions
36. Removal Review Authority
37. Retirement Commissioner
38. Social Workers Registration Board
39. Sport and Recreation New Zealand
40. Standards Council
41. Standards New Zealand
42. Tertiary Education Commission
43. Te Puni Kokiri
44. Radio New Zealand Limited
45. The Bioethics Council
46. Transport Accident Investigation Commission
47. Valuers Registration Board
48. Walking Access
49. War Pension Services
C’mon JK, Chop, chop.
Vote:May 21st, 2010 at 2:37 am
@kk, do you have some kind of list machine or far too much list generating time..?
I think we need a Registrar of Lists… A List Commission..?
Could you please redo your list with an explanantion of what they do… Surely the Registrar of Unions’ job doesn’t take too many hours a day or the Bioethics Council…
The Plant Variety Rights Office..? Surely one could win an election by simply promising to cut this one organisation… Admit it, you made this one up in an effort to get to 50…
Vote:May 21st, 2010 at 9:59 am
You forgot then Ministry of Economic Development- what do they do? What economic development projects have they facilitated recently.
Vote:May 21st, 2010 at 2:44 pm
Holy moley KK!! We have Ministries of Maori and Pacific Island Affairs and an Ethnic Affairs Council?! A Ministry of Womens Affairs and some quango on the employment of women?!?
Not only do we have bullshit organisations, they have duplicates!!!
While there is a need for registration of certain professions (social workers, real estate agents etc) surely a single administrative body could run the small secretariat needed, with specialists called in when one of the registrants was accused of wrongdoing.
The “NZ artificial limb board”?! Its members must be laughing all the way to the bank. Do they wave prostehtics around at meetings, calling out “‘ear, ‘ear”?
Vote:May 21st, 2010 at 3:57 pm
The Breastfeeding Commission is one of my favourites. Bet you didn’t know we had one.
Vote:May 21st, 2010 at 4:36 pm
ALL THESE MINISTRIES AND NOT ONE DIME FOR SILLY WALKS????
Now I’m really pissed off!
Vote: