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Polity: Budget 2014: Over-promise. Under-deliver.

Written By: - Date published: 3:18 pm, May 15th, 2014 - 40 comments
Categories: bill english, budget 2014, debt / deficit, housing, national, same old national - Tags:

polity_square_for_lynnRob Salmond at Polity on the budget.

Earlier this week I predicted the Budget would be Labour-lite. I was right, but only in part. Extending PPL, more money for ECE, and extending free doctor visits for more kids are all good ideas.

But in other enormously important areas, I was wrong. National’s commitment to first home buyers and to wage earners isn’t even too little too late. It’s a poke in the eye too late.


By far the biggest disappointment is in housing. The government signalled help for home buyers would be a highlight in the Budget. This morning, Stuff published a poll showing:

Help for buyers of first homes was top, 76.4 per cent of those surveyed believing it would be good for the country, including those who did not see it making a difference to them personally.

So what did they get? An end to duties and tariffs on plasterboard, reinforcing steel, nails, and some other building materials. Woohoo! The street marches and the letter-writing campaigns worked! The government says this will reduce the cost of building a new home by a paltry $3,500, a good portion of which will be absorbed by contractors and developers.

And that pathetic morsel is it.

This will make next to no difference to the housing affordability crisis. First home buyers aren’t $3,500 short of a house. They are hundreds of thousands short, because there aren’t nearly enough homes. National was vulnerable on housing before today, and are even more vulnerable now.

Growth for owners, but not for workers

Thanks to the global recovery and the rebuild, real GDP growth is forecast to be 14.2% over the 2014-2018 forecast period. That’s around 2.8% annually, which is pretty good.

But real wage growth (wage growth less inflation) is forecast by the government at less than 4% over the entire five year forecast period.1 That’s 0.8% annually. It is pathetic.

How can this government accept – and even celebrate – of a situation where the fruits of growth are mostly hoarded by the owners of capital, and are not shared with wage earners in a remotely fair manner? It is an insult to the millions of workers who missed out in National’s recession-era tax switch in 2010, and are now missing out on the recovery-era growth as well.

The government has run out of its own ideas. Where it can stomach Labour’s plan, it has announced a flaccid imitation. Where it cannot stomach Labour’s plans, it has erected surrender signs instead.

  • 1.Budgert Executive summary, page 3, LHS

40 comments on “Polity: Budget 2014: Over-promise. Under-deliver. ”

  1. lprent 1

    Don’t diversion troll this post. I’m getting tired of it. Stay on topic or go to Open Mike

    I’m going to start banning until after the election for the idiots who can’t follow this simple requirement.

  2. You_Fool 2

    “How can this government accept – and even celebrate – of a situation where the fruits of growth are mostly hoarded by the owners of capital, and are not shared with wage earners in a remotely fair manner?’

    I thought we had already ascertained that this government isn’t looking out for the common man, but the rich guys in teh top hats and expensive cars

  3. Jepenseque 3

    You conflate two statistics that are not the same. One is a per capita measure (ave wage) And one includes pop growth (real GDP). So the 14 vs 4 is not a good comp. Cheers

  4. Clemgeopin 4

    This budget is a con artist’s hoax budget.

    Key and English have simply copied and dressed up many of the Labour’s social policies due to shameless political expediency and have pretended it is their own!

    The glaring shame is that IN SPITE of selling off our very profitable power assets raising 4.7 billion dollars, the sleight of hand manipulated trick surplus is so very awfully small. Imagine if these buggers had NOT sold the assets to primarily help their rich mates! That is the extent of their economic proficiency.

    They were not even able to make a dent in their ever growing 65 billion dollar debt! $65,000,000,000! $11,000 per every person in the country!

    This is a very inefficient, useless government full of spin and BS!

    • infused 4.1

      Hang on though. If National copied all of Labours policies, isn’t that a win?

  5. Stuart Munro 5

    Nice juxtaposition on Stuff:

    Live Chat Bill English: Election year pitch to families … Screams then silence

  6. Tracey 6

    so in real terms they cut ece funding, then give some back five years later and call it good news.

    will they legislate that the drop to plasterboard etc must be passed on to consumers or will they rely on companies to do the right thing?

  7. Disraeli Gladstone 7

    I’m struggling to be disappointed. It’s a dreary budget, but it’s not anything evil. A little bit of good; nothing bad (except apathy to some issues). It’s just stolid. I think English has given National a pretty firm foundation to run into the election.

    And the rise from under 6 to under 13 free doctor visits is a pretty great policy. I don’t know if that’s been stolen from Labour? But I’m glad it’s being implemented anyway, that’ll be a real life saver for a lot of people.

  8. Olwyn 8

    The free doctor’s visits for children up to the age of 13 is good, provided it is not undermined by fine print of some sort. But it is an election year budget, after six years of mean-spiritedness toward much of the population and largesse toward cronies. Hence for the most part it comes across to me as the equivalent of cheap pink bubbly and gas station flowers from a cheating spouse.

    • Blue 8.1

      I found the doctor visits part bizarre. It’s not bad by any means, but really, if you think about what Kiwi kids need most, this has not really been on anyone’s agenda, left or right.

      It’s seemingly come out of nowhere.

      I imagine some late-night National strategy meeting which went something like:

      JK: “We need to do something for kids. Labour’s getting traction on all that 250,000 kids in poverty stuff.”

      BE: “Yeah, but we spend most of our time pretending the poor don’t exist or pouring scorn on them. We can’t acknowledge them and we definitely can’t do anything to support them.”

      JK: “It has to be something neutral. What about doctor’s visits? Even hardline poor-bashers make exceptions for medical stuff and Labour can’t attack it.”

      BE: “Works for me.”

      • Anne 8.1.1

        Blue’s got it in one…

        Btw. Imperator Fish has sussed it:


      • Olwyn 8.1.2

        I think you’re right Blue. As my comment suggests, I don’t trust those guys in the slightest. I am convinced that genuine alleviation of poverty is simply out of the question for them. I also think that if they win the election they will use their coalition with ACT, gifted with Epsom, to do whatever their sponsors want, regardless of what they promise now.

      • Ergo Robertina 8.1.3

        The expanded children’s doctor visits puts me in mind of the Hollow Men inoculations, where Brash had to be gently coaxed into taking unpleasant medicine on govt programmes in order to hide his true agenda and views.
        It is an election year inoculation on child poverty. It also slots in neatly with the rheumatic fever programme when reeling off the list of things National is doing to alleviate poverty.

  9. KJT 9

    Meanwhile the reserve bank ACT will ensure any wage increases/small business income, for most people, will go straight to bank profits in increased interest rates and rent.
    While a high exchange rate, asset sales and the cost of Nationals borrowing for tax cuts, for the rich to go on Hawaii holidays, means a negative balance of payments, and continued lose of jobs, is cemented in.

  10. millsy 10

    Credit where credit is due about the doctors visits. Not even Jim Anderton could get that in a booming economy.

    • Harriette 10.1

      Don’t most practices still charge for the already “free” doctors visits?

      So does this policy just subsidise doctors?

  11. Mr Interest 11

    Hi there, I am thick as the bat proverbial when it comes to economics so can someone out deconvolute the budget for me. I know some explanations were given, however, just keen to now more.

    Basically will NZers have an improved standard of living? They keep spouting that incomes with go up but what if everything else does, what does it mean in real terms.

    Please use the indicators below? I’m a little worried that after you take out the effect of assets sales, inflation and the Canterbury build, its all bs. More than happy to be wrong. National strategy seems to be micro wins, that turn into big media wins.

    Seriously, can an economist help?

    Top 10 Economic Indicators:
    1. Real GDP (Gross Domestic Product)
    2. M2 (Money Supply
    3. Consumer Price Index (CPI)
    4. Producer Price Index (PPI)
    5. Consumer Confidence Survey
    6. Current Employment Statistics (CES)
    7. Retail Trade Sales and Food Services Sales
    8. Housing Starts (Formally Known as “New Residential Construction”)
    9. Manufacturing and Trade Inventories and Sales
    10. S&P 500 Stock Index (the S&P 500)

    Aside, wouldnt it be great if all young NZers were taught economics (the study of human behavior) from a young age?

    • Colonial Viper 11.1

      Economics is NOT “the study of human behaviour”. Mainstream economics and mainstream economists have almost destroyed the financial world. Why would you want to propagate their ideology further?

      An alternative non-traditional branch of economics “behavioural economics” has established itself over the last 10 years (Daniel Kahneman etc) and they make far more sense than the neoclassical nonsense that infect the private investment banks, Treasury and the Reserve Bank.

      10. S&P 500 Stock Index (the S&P 500)

      If you truly believe that the manipulated gamed casino markets has anything to do with the standard of living of ordinary Americans, you need to be completely re-educated.

      I suggest you start reading zerohedge.com and watching the Keiser Report.

      • srylands 11.1.1

        Behavioural economics is hardly “non traditional”. You have been around alternative health care practitioners for too long.

        • Colonial Viper

          Behavioural economics is completely non-traditional. It is a major break away from the methods of economics which rely on DGSE modelling and other highly mathematized approaches.

          It’s treatment of consumers and of markets is also completely at odds with the “rational agent” approach of classical economics because it not only accepts but actually factors in non-rational heuristics and biases into expected behaviour.

          In many ways behavioural economics is a major repudiation of the dogma of mainstream economics.

          I’m surprised that you would try and insist otherwise.

    • Gosman 11.2

      Most of those are only impacted indirectly by any budget. The fact the budget is back in surplus will help somewhat in that there is less stress on money supply affecting inflation.

      • KJT 11.2.1

        Surplus. Only if you believe transport funding to Auckland is a loan. Which is just one of the many accounting finagles National have committed to give the illusion of a surplus.

        And we will be paying for National’s sneaky cuts to essential services, for generations.

        • Colonial Viper

          Balancing stupid electronic ledgers is more important than looking after kids in poverty, tens of thousands of young unemployed or preparing society for an oil depleted future.

          Our civilisation is quietly going insane and destroying itself in the process.

          • KJT

            The neo-liberal structural deficit which we may never be able to recover from.
            Especially as National accelerated it after a sort of pause under Labour.

            As Brain Easton says, “the mismanagement from 1984…………

          • Draco T Bastard

            Our civilisation has been insane for quite some time. If it wasn’t then we wouldn’t have been having massive debates about climate change – we would have been doing something about it. Actually, we probably wouldn’t have it as we would have made more rational decisions such as not having cars and probably capped population back around 1900.

          • Grumpy

            Unless you balance the ledgers you can’t do anything.yi

  12. Colonial Viper 12

    Thanks to the global recovery and the rebuild, real GDP growth is forecast to be 14.2% over the 2014-2018 forecast period. That’s around 2.8% annually, which is pretty good.

    Sounds decent except nah, it’s not actually going to happen, not in a million years. Energy depletion and GFC II will take care of it mate.

  13. Mr Interest 13

    Col Viper, brilliant, thanks for the advice. I remain told off. Not even a little info on points 1-10, anyone??

    Just one last request, it would be a useful indicator to know how much the national party has influenced the economic up turn. Suspect they may have not have had alot to do with it. More milk being sold to China? Was that really just going to happen any way?

    Just some parting comments CV

    I loved this quote (considering the media is jumping up and down about the brighter future):

    “The economic future, like the political future, will be determined by future human behavior and decisions. That is why it is uncertain. And in spite of the enormous and constantly growing literature on business cycles, business forecasting will never, any more than opinion polls, become an exact science…

    As one investment advisor put it: “No matter how many times they fail, their self-assurance never weakens. Their greatest (or only) talent is for speaking authoritatively.”



    Definition from http://www.merriam-webster.com/dictionary/economics

    “Social science that analyzes and describes the consequences of choices made concerning scarce productive resources. Economics is the study of how individuals and societies choose to employ those resources”

    Go well

  14. karol 14

    It seems to me, while the extras for families such as free doctor visits, will be helpful up front, such things will be undercut by action or non-action in other ways.

    The cuts to ACC car levies for instance – an incentive for more car ownership and use. Meanwhile that will cause a tightening of what ACC can provide for people.

    I don’t see anything that will help those in transport and energy poverty or struggling to get affordable housing.

  15. Ad 15

    Take a good look at the transport components of the budget and see if this $1b of infrastructure will assist the housing crisis at all. After all there’s no point having a house if you don’t have the ability to travel to and from it.


    $800m on motorway upgrades, and $50 for the AMETI programme with its major road uprgade and dedicated busway (the only public transport component in the package).
    Plus another $50M for East-West, which Brownlee insists at the behest of the business lobby must be nothing but a motorway.

    Nearly $200m on rail, none of which goes to supporting the needs of the cities it should serve. Ridiculous reward for 2 full years of procurement fuckups.

    Any one of those new motorway budget lines could have started the City Rail Link. Exactly this day Auckand Council determined to enable a downtown developer to get the first part of the City Rail Link designed and not precluded.

    Not a single one of those motorway projects will assist the housing crisis.

    But extending rail electrification to Pukekohe would have. Some are worthwhile, but not against Auckland’s screaming public transport deficit, or Christchurch’s groaning and underfunded plans. They could have chucked a couple of those motorway jobs out the window and built an entire dedicated bus line up the SH16 northwestern, to same quality or better than the North Shore SH1 line. Now that would have assisted building massive housing projects in the north-west.

    For $1b, we get ‘car is king’ and no help for cities from rail.

    • karol 15.1

      and Generation Zero says the budget is the lowest investment in energy efficiency since 2008.

      “Energy efficiency is an essential part of transitioning our energy and transport systems off fossil fuels and a major opportunity to improve our economy. EECA estimates that we could be saving $2.4 billion per year today simply by implementing cost-effective efficiency measures.

      “Energy efficiency is a win-win solution to climate change, and by cutting back funding the Government is sending a message that it doesn’t care.”

      • Colonial Viper 15.1.1

        Applying Jevon’s paradox suggests that making things more energy efficient and cheaper to run results in zero energy savings.

        Why? Because people end up using those things more and no energy is actually saved.

        The classic NZ example -heat pumps. Way more efficient than other electrical heating? Yes. So what do people do? Install two in the home and leave them on all weekend, because “it’s efficient.”

    • Colonial Viper 15.2

      For $1b, we get ‘car is king’ and no help for cities from rail.

      This is fertile ground for Labour – it must have the guts to repurpose tens of millions worth of motorway spending on rail, and re-task English’s rail spending on only the most worthwhile rail projects.

      And add this kicker – first preference for all contracts is going to NZ owned and based companies.

      This would win 100,000 votes in a heart beat.

  16. Disraeli Gladstone 16


    Great piece on this budget and touches upon what Rob was saying about “Labour-lite”.

  17. RedBaronCV 17

    “An end to duties and tariffs on plasterboard, reinforcing steel, nails, and some other building materials. ”
    Do we import this stuff or make some of it here? If we import it all then the tax take has just gone down slightly with no guarantte that it ends up in home owner hands. If we make some of it here then here comes cheap, possibly substandard imports, job loss, tax loss, and no guarantee that it ends up with the home owner.

    • greywarbler 17.1

      Are we going to buy plaster board from China too along with everything else. Vietnam are tired of Chinese shops and factories in their midst and it seems that now Chinese are building an offshore airport on distant islands and tapping into oil in disputed waters, they are just too ubiquitous. We enjoy them but even we might feel swamped soon.

      Are we going to have another debacle in housing as the NACTs demonstrate their acuity versus their addiction for cheap. Housing could be the slingshot that gets money flowing into the economy if only they would get into it.

      But in Christchurch Brownlee prefers to be the patient wise man saying of course these complex things take time, but the things he is interested in are the CBD, stadiums and big stuff.

      No wonder people couldn’t get portaloos. I suppose English said it’s more of a want than a need. And everything that people since have said honestly and fervently about jobs, houses etc. has just received this distancing treatment. Oh that’s a SEP.

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    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Govt parks the expiry of licenses, WoFs and regos
    As a result of the Delta outbreak, driver licences, Warrants of Fitness (WoFs), Certificates of Fitness (CoFs), vehicle licences (‘regos’) and licence endorsements that expired on or after 21 July 2021 will be valid until 30 November 2021, Transport Minister Michael Wood has announced today. “While this extension won’t officially ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • COVID-19 community fund to provide support for vulnerable women and girls
    Minister for Women Jan Tinetti today announced a $2 million community fund that will provide support for women and girls adversely affected by COVID-19. “We know that women, particularly those who are already vulnerable, are disproportionally affected by the kind of economic disruption caused by COVID-19,” Jan Tinetti said. ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Next phase of support for Fiji’s COVID-19 response announced
    A further NZ$12 million of support for Fiji’s COVID-19 response has been announced by Foreign Minister Hon Nanaia Mahuta today. The package builds on previous tranches of assistance Aotearoa New Zealand has provided to Fiji, totalling over NZ$50 million. “Fiji remains in a very challenging position in their response to ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Robotic asparagus harvester aimed at addressing industry challenges
    The Government is backing a $5 million project to develop a commercial-scale autonomous robotic asparagus harvester, Agriculture Minister Damien O’Connor announced today. The Sustainable Food and Fibre Futures fund (SFF Futures) is contributing $2.6 million to the project. Project partner Robotics Plus Limited (RPL) will build on a prototype asparagus ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Additional Pfizer vaccines to arrive tomorrow
    More than a quarter of a million additional doses of the Pfizer vaccine are on their way from Spain to New Zealand, Prime Minister Jacinda Ardern announced today. The additional doses will arrive in Auckland on Friday morning to help meet the current surge in demand for vaccination. “It’s been ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Young people to have their voices heard in Youth Parliament 2022
    The dates and details for Youth Parliament 2022 have been announced today by Minister for Youth Priyanca Radhakrishnan, and the Speaker of the House of Representatives. Youth Parliament is an opportunity for 141 young people from across Aotearoa New Zealand to experience the political process and learn how government works. ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Boosting support for tertiary students affected by COVID-19
    Students facing a hard time as a result of COVID-19 restrictions will continue to be supported,” Education Minister Chris Hipkins confirmed today. The Government is putting a further $20 million into the Hardship Fund for Learners, which will help around 15,000 students to stay connected to their studies and learning. ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • COVID-19: Immediate relief available for Māori and iwi organisations
    The Government has reprioritised up to $5 million to provide immediate relief to vulnerable whānau Māori and communities during the current COVID-19 outbreak Minister for Māori Development Willie Jackson announced today. The COVID-19 2021 Whānau Recovery Fund will support community-driven, local responses to gaps in access and provision of critical ...
    BeehiveBy beehive.govt.nz
    2 weeks ago