A booming tax take is clearing the way for Grant Robertson to hit the targets
Friday, 18 May 2018
OPINION: Not everyone is winning in the New Zealand economy, but the Government's coffers certainly are.
Although forecasts are just an elaborate form of guesswork, in Budget 2018, Treasury is pointing to billions more flowing to the Crown compared to what we expected back in Christmas.
While the term is generally used as satire, this may be what the 'rockstar economy' looks like.
Homelessness is rising as inequality grows.
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But companies are making bigger profits than what we expected, meaning more being paid in corporate tax.
Salaries and wages may not be growing at a rate which anyone is excited by, but there are just so many of them that PAYE receipts are unexpectedly large.
For years the economy has been adding thousands of jobs a month and while the rate is expected to slow somewhat, another 203,000 new jobs will be created over the next five years.
For all of the surveys showing business confidence has plunged, there are few signs that anyone in the real world would notice that this is making a blind bit of difference.
As Stephen Toplis, head of research at BNZ said, for years New Zealand's finance ministers have been publishing Budgets with rising surpluses and falling debt, and Thursday was no different.
'I think New Zealand's the envy of the world in that regard and this was no different.'
Grant Robertson, in the biggest day of his political career finds himself in both an enviable position and one with an immense challenge.
He could be forgiven for seeing his first Budget as vindication.
Just a few months ago Robertson was facing accusations of an $11.7 billion 'fiscal hole' as he was forced to defend what appeared to be an unrealistic spending programme, cobbled together by MPs who probably did not expect to be in Government when they made them.
Whatever the truth of the fiscal hole was, it matters little now.
Since December, the amount of money at Grant Robertson's disposal over the next five years has climbed by $5.7b, according to Treasury forecasts. Come 2022, the amount of tax the Government is taking will be close to $100b a year.
Businesses may not feel as good about Labour in Government as it did about National, but as Robertson said, they're working hard.
Coupled with taking longer to fulfil his promises, suddenly the path for Robertson to reach his debt target looks far more realistic than it did just days ago.
National can accuse Labour of 'tax and spend' all it wants - we were told, over and over, that Labour's numbers would never add up. Yesterday, that appeared to change, for the time being at least.
The major criticism for Robertson's first Budget was what it left out. For all of the restraint that National preached during its nine years in Government, almost without fail there was a populist surprise on Budget day.
For Labour, which swept to office with huge expectation, the surprise was that there was no surprise.
This was very likely to be deliberate. Finance Ministers are always facing massive demands for money, and after a decade in the abyss, this Labour Government is under more pressure than National ever was.
Almost everyday it seems that some organisation is announcing they are planning industrial action, or joining action.
Pressure for wage increases to 'catch up' for years of underspend are only building.
Shortly after the Budget was announced, the president of teachers union NZEI Lynda Stuart said the amount of new spending in education 'failed to deliver more than a minimal patch up on the foundations of education that have been neglected for the past decade'.
By delivering an unexpectedly restrained Budget on Thursday, Robertson may do at least a little to temper expectations.
He may also do something to improve confidence among businesses, if not business confidence itself, by showing that he is able to make some of the hard decisions which politicians must make to keep the state in check.
But this will only take Robertson and the Labour Government so far, especially when he describes this administration as 'transformational'.
Where the 2018 Budget was tagged as 'foundations for the future', Robertson has already promised that 2019 will be about 'wellbeing'.
After National told the country it had to do without as New Zealand worked its way out of the global financial crisis and then the impact of the Canterbury earthquakes, the pressure to for people to catch up will not go away.
But at least for his first Budget day, the news is that Robertson appears to be in a position to do the spending he promised while getting debt to come down as he promised.