The New Zealand Labour-led Government’s first budget has been judged to be conservative, cautious, restrained. It was the first step in an innovative way to reverse trends that have been souring New Zealand society. The aim is to invest in the wellbeing of the nation and improve lives, not just the economy.
The Labour-led coalition ended nine years of National (Liberal-like conservative) government. It is the beneficiary of nine years of economic growth that has produced a budget surplus that offers options for government spending. At last year’s election National promised to spend some of the available surplus on massive tax cuts. Their perspective was that it would help build business, trickle down to better employment and wages and help them win the election.
The economic success of the past nine years could be said to be substantially the result of factors outside the Government’s control. There has been substantial expenditure on rebuilding after Christchurch’s heavily insured earthquake. The final cost to the insurance industry and the Crown could be at least NZ$40 billion. In addition there have been historically high prices of dairy and log exports. These factors have fed domestic demand and employment.
Unemployment stands at 4.4 percent and is projected to be 4.1 per cent in 2019. Business is brisk and the tax take is higher than expected. The temptation for the new Labour-led coalition to spend heavily would have been great.
Instead the budget was generally considered fiscally responsible by projecting a surplus while boosting expenditure on the government’s highest priorities, investing in long overdue improvements to a wide spectrum of the country’s public and social infrastructure.
Those priorities were couched in language that was not the usual straight-laced finance minister speak. Finance Minister Grant Robertson said Budget 2018 sets out the first steps in “a plan for transformation, a transformation of the economy, a transformation of public services and a transformation of the way the country works together to improve the lives of all New Zealanders”. He spoke of turning away from the ideology of individualism and the hands-off approach to the economy that has left many people behind. He spoke of a government that would produce national wellbeing, not just economic health. He spoke less about GNP and more about New Zealanders living “successful, connected, healthy and fulfilling lives”. This government would invest in a way that would reduce the future high costs of bad housing, bad health, underfunded education, child poverty and high prison musters.
The process started back in December when several reforms were launched in the government’s plan for their first hundred days. It included a boost in income for the poorest families, an increase in the minimum wage, an increase in paid parental leave to eventually reach 26 weeks and more affordable housing.
The budget built on these reforms and in doing so managed an impressive balancing act. It retained the support and gained the approval of its diverse coalition partners, New Zealand First and the Green Party.
Robertson said in his Budget speech that the partners have a shared purpose to improve the lives of all New Zealanders for generations to come. He announced some heavy expenditure on priority sectors while still reporting a surplus that is projected to increase substantially to over $7 billion ($NZ) by 2022.
Most expenditure in this budget is aimed at rebuilding core public services that the government says have been neglected for too long. Health will receive a major boost with billions more for operating budgets and capital expenditure. GP visits that can cost up to $NZ60 in New Zealand will be substantially cheaper for many and free for children under 14. Education will be boosted by greater funding for schools and there will be programmes for supporting mental health in the young. The government has already launched a programme that allows every New Zealander a year of free education or training at any age after leaving school. Robertson said better education leads to better lives.
The mini budget in December provided for a hundred thousand new houses. Another billion dollars were added in the budget for many more warm and dry state houses and homes for the open market. Robertson said that never again will New Zealand be reported as having the worst homelessness in the OECD. A process would be set up to house the homeless.
There was money for the Government’s ambition to become a net zero emissions economy by 2050. Programmes to plant a billion trees and support for forestry are the start of it and the Government will invest to help the transition to a more sustainable economy with jobs in new, clean industries.
In April the government took the dramatic step of banning new permits for offshore oil exploration. The decision won’t affect existing permits but Prime Minister Jacinda Ardern said now is the time to start planning for a carbon neutral future.
Child welfare is a high priority for the Prime Minister. Ardern has pledged to halve the number of children in poverty in ten years and has set interim targets for the next three years. Two new expert units are being established within her department to develop strategies to reduce child poverty and improve the lives of all New Zealand children. The experts should produce options for funding a major assault on child poverty in next year’s budget.
Robertson said the criminal justice approach that gives New Zealand one of the highest incarceration rates in the world can’t be allowed to continue. The budget provided for more prison accommodation as a stop-gap measure while the number of prisoners continues to rise. In the longer term the government aims to reduce the prison population by over thirty percent through better housing and support for training and reintegration programmes.
This was just one of several pointers to future expenditure. Robertson said that next year the Government will be ready to produce the world’s first “Wellbeing Budget”. Instead of using GDP and traditional fiscal indicators as the only measures of success, the Wellbeing Budget will assess annual progress against a range of factors that reflect the health and wellbeing of people, the environment and society. A “Living Standards Framework” developed by the New Zealand Treasury will help develop the budget and measure the Government’s success.
It is an investment approach to creating a productive and inclusive society. So far seventy-five reviews and working groups have been set up so that next year the government will have the information it needs to make investments in health, education, justice and welfare policies that are known to be effective in producing smaller prison populations and healthier, better educated and housed New Zealanders.
Max Hayton is a New Zealand journalist with parliamentary and international experience.