Expect 'few lollies' in the Government's Budget
Friday, 17 February 2023
The country should not expect many “lollies” in the 2023 Government Budget, Finance Minister Grant Robertson says.
“This isn’t a Budget where people should expect to see huge sums of money thrown around,” he told the Auckland Business Chamber annual economic update lunch on Friday.
Whether it was coming from Robertson or fellow speaker Westpac general manager Reuben Tucker, the event was full of hard truths.
Robertson opened his speech with the prediction that climate change would be a main topic of every finance minister's speech at such events from now on.
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'There is no point in talking about one-in-100 year events any more, we will be dealing with them regularly,” he said.
He said hard discussions would have to be had on where we lived, what infrastructure was built, and who paid for what.
Robertson said the worst thing to do in response to the recent devastation was to rebuild as it had been before – a sentiment echoed in Tucker’s speech.
Managed retreat would also become a central conversation.
Estimating the cost of the rebuild was not possible at this time, Robertson said.
'What I can tell you is it's not Covid - Covid was the whole country.”
He said the same level of business support would not be required this time.
'It was a regional event compared to that nationwide event.'
Low unemployment, one of the lowest levels of government debt, and an economy larger than pre-Covid all suggested New Zealand was in a good position to weather 2023.
But Robertson said none of this would help Kiwis who found their cost of living had increased.
Robertson said for that reason, fighting inflation remained among the Government's top priorities.
That made balancing the need for government spending with the need to fight inflation a tricky balance to strike.
Robertson said a key focus of the budget would be funding the repair of transportation networks, and he would be looking at the operational costs of the government as it tried to fund infrastructure.
He said infrastructure was usually split 60/40 between central government and local, but some smaller councils like Gisborne might not have the funds to repair damaged infrastructure.
During questions with old-political rival Simon Bridges, Robertson would not be drawn on what he thought the Reserve Bank should do at next week’s official cash rate decision.
“Keeping inflation under control is their job.
“They have an important job to do, and they have a particular level to do that – which is the official cash rate.”
Tucker was happy to weigh in, and added his voice to calls for the Reserve Bank to hold back from rate hikes.
“There’s likely to be a short-term impact on the cost of many things - we think that will be short-lived,” he said.
On immigration settings and the need to bring workers in to help with the recovery, Robertson said the Government was actively working on ideas.
“We understand there will be a need for people to be there not only in the response phase, but the recovery,” he said.
Tucker also talked of a paradigm shift that would be required from the banks: “We think short, we lend short, we can make short-term decisions, and that has to change.”
He said true sustainability required long-term decisions, in order to reduce risk for the bank and its customers.
Tucker also warned banks would have to re-look at how small businesses were funded, particularly in flood-hit areas.
“Unfortunately we are going to find out the hard way that most small businesses are funded by mortgages over customers' homes and many people will have lost their homes but also their collateral of how they fund their business,” he said.
Bridges opened the conference, saying it was intended as a chance to get the first glance at Budget 2023, but it came against a “remarkable backdrop” of some of the worst floods in New Zealand’s history.
Tucker said the question had to be asked whether “black swan events” like the cyclone were going to be considered such in the future.
“You do wonder if we are living in a world where we get desensitised to these extreme events.”