No great expectations, but what a bleak house

Written By: - Date published: 8:53 am, May 29th, 2009 - 5 comments
Categories: budget 2009 - Tags:

Listening to Bill English’s budget speech, I was reminded of Dickens’ description of Scrooge: “The cold within him froze his features, nipped his pointed nose, made his eyes red, his thin lips blue, and he spoke out shrewdly in his grating voice …”

There was nothing shrewd about this bit though:

“The current projections show debt would have reached 48 per cent of GDP by 2013 and 70 per cent by 2023, without any commensurate increase in Crown assets.

That level of debt would be more than all the debt raised by government since the Second World War. It equates to just over $45,000 for every New Zealander. Put another way, it would represent $180,000 of government debt for every family of four equivalent to a second mortgage on their home.

Projected finance costs would, in time, have reached levels similar to spending on District Health Boards or on all sectors of education combined.”

He was quoting John  Whitehead of Treasury who raised exactly the same bogey word for word in a speech on May 15. Bill’s a Treasury puppet, and his Budget is reminiscent of “Economic Management”, the last time Treasury ran the cutter.

But building a budget on the basis of that sort of wet-finger forecasting, fourteen years out with no assumptions defined, is downright irresponsible. All the more so, when saving schemes like Kiwisaver and the Cullen fund are cut or cut back, funding slashed for skills and research, and empty promises made about future entitlements with nothing to pay for them. As one bank economist said, the fiscal numbers are very sensitive to the economic cycle in both directions. “The risk is that just as Treasury underestimated revenue in the boom they will over-estimate the structural deficit ahead.”

Two years ago John Key said “New Zealand doesn’t have a debt problem, it has a growth problem”. He was wrong about country debt but right about government debt. Bill English is wrong about government debt, spooked by the ratings agencies and the financial markets about country debt, and has cut the research and skill development programmes that might have done something about growth.

The other forecast the Treasury will have wrong is the unemployment level. And all this after tax cuts passed under urgency late last year when the recession was already on us that gave 70% of the cuts to 3% of earners.

A miserable budget from a miserly government, all cut and no investment.

The striped suits around Bill won’t suffer, but many other Kiwis will. It will be a long hard winter.

5 comments on “No great expectations, but what a bleak house ”

  • Comments are now closed

  1. r0b 1
    29 May 2009 at 9:46 am

    It will be a long hard winter.

    Yes, The Battle of Life just got harder for Kiwis. We’re in for Hard Times. Not just this winter, All The Year Round.

  2. millsy 2
    29 May 2009 at 10:09 am

    Just be greaful it wasn’t a slash and burn budget. Bill English could have quite easily channelled Ruth Richardson and slashed everything.

    They could have privatised ACC
    They could have chopped WFF to pay for the tax cuts
    They could have hiked state house rents to market levels
    They could have introduced charges for hospitals

    Yes, this budget has been a misrely one, and I am for one not happy about it, but I am taking stock in the fact that it could have been much, much worse…

  3. capac 3
    29 May 2009 at 10:53 am

    Talking of Bill channelling Ruth, there’s a survey on Stuff.co.nz that is asking people to rate English next to Richardson, Douglas et al. Will be interesting to see the results – is he really better than them? Or is it key sitting on his shoulder that made this budget milder than your traditional Nats razor.
    http://www.buzzchannel.co.nz/SE/default.aspx?u=4b5276b823d04cb292e50692d372a9f1

  4. Tigger 4
    29 May 2009 at 11:01 am

    Yes, and there could have been a terrible earthquake that swallowed up the entire North Island, lava could have rained from the sky and giant one-eyed monsters could have eaten your parents…

    They’re saving more pain for next year.

    I have no problem with fiscal prudence. I do have a problem when the government seems utterly clueless about the problems facing us.

    Big Problem #1 – job losses. Solution – job creation. So where are the jobs National? The bleakness in this budget for me is the fact that this government STILL has no idea of how to create work for people and has not provided any visionary thinking (and we need visionary at the moment) in order to accomplish that.

  5. Tom Semmens 5
    29 May 2009 at 11:39 am

    They could have privatised ACC
    They could have chopped WFF to pay for the tax cuts
    They could have hiked state house rents to market levels
    They could have introduced charges for hospitals

    And they would be a one term wonder.