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.