Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


BUDGET 2012 COMMENT: Doddling along the best we can hope for

BUDGET 2012 COMMENT: Doddling along the best we can hope for

By Pattrick Smellie

May 25 (BusinessDesk) - Criticising Budgets for lacking vision or imagination is like shooting fish in a barrel, but even so, this year's Budget again feels like a missed opportunity.

Perhaps it's the intrusion of real world needs that means the government couldn't make better political use of the $558.8 million it expects to gather in its first partial asset sale.

After all, the title for this year's Budget is "Investing in our Future", which looked briefly like a bit of PR conjuring to contrast the pain of asset sales against the gain of new public assets.

But what did we get instead? A $250 million capital injection into KiwiRail. Granted, there's a political constituency for keeping alive our threadbare version of that 19th century technology. But let's face it, the recapitalisation of KiwiRail is a distressed investment. It even says so in the Fiscal Risks section of the Budget, which warns not only that KiwiRail will probably want another $90 million next year for reinvestment in its network, but that proposed writedowns to the KiwiRail balance sheet also represent a "new, unquantified" fiscal risk.

If there was ever a case for governments not owning businesses, KiwiRail is it.

Beyond that, the Budget is as you'd expect. Assiduous tweaking of revenue and spending - particularly more than half a billion dollars of savings from deferring automatic KiwiSaver enrolments - has helped support forecasts for a wafer-thin Budget surplus of $197 million in June 2015.

And that's achieved with a lot of priority shuffling allowing significant new investment in health, education, justice and science priorities.

While it's a zero Budget, it's by no stretch an "austerity" Budget, although kids who pay PAYE might not agree, having had their previous right to get overpaid tax refunded in exchange for making honest boys and girls of those who do odd-jobs for cash in the hand, which have always been theoretically taxable.

A cynic might put that move together with the latest whack at tobacco excises by speculating that would-be adolescent smokers will favour tax-free lawnmowing over taxed café work to fund the habit.

Part of the problem with Budgets is that their focus on the government's fiscal position crowds out the opportunity to identify major new strategic approaches which might actually make the New Zealand economy grow faster.

That's arguably where the biggest hole in the Budget lies.

Using current policy settings, the Treasury projects out key economic indicators through to 2026. The further out those projections go, the less likely they are to be accurate.

However, the fact that economic growth is projected to be just 2 percent a year by 2026 is effectively an admission of defeat on the likelihood of any step-change in the country's performance.

Until that long-term projected growth path improves, and is accompanied by a sustainable set of external accounts, then next year's Budget and those which follow it will continue to look like this one and the last one. That is, a document that tweaks the forward outlook, but promises only more of the same doddling along - assuming of course that the rest of the world plays ball.

The Budget assumes China and Australia will keep coming to the rescue of our export sector, at the same time as the turmoil in Europe remains the darkest and most unpredictable cloud on the horizon.

If that doesn't happen, even doddling may be a bit much to expect on current policy settings. So, yes, a sensible, balanced Budget, but not yet one to keep our children here.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Balance Of Trade: NZ Posts Trade Deficit In October On Falling Dairy Exports

New Zealand’s posted its largest monthly trade deficit for October in six years, while narrowing the shortfall from September, led by a fall in dairy exports to China while all main imports into the country rose. More>>

ALSO:

Gigatown Winner: Plenty Of Positives For Dunedin

Although the city has taken the Gigatown title, along with new ultrafast 1Gbps broadband and funding for $700,000 worth of UFB-related initiatives across the community, Mr Cull says Dunedin has gained so much more through its involvement. More>>

ALSO:

R18: The Warehouse Group Praised For Removing Games

The decision by New Zealand’s largest retailer The Warehouse Group (TW Group), to withdraw stocks of the latest version of Grand Theft Auto V (GTA V) and other R18 games, has been praised by advocacy group Stop Demand Foundation. More>>

ALSO:

Air NZ Wine Awards: Victory For Villa Maria As Pinot Noir Thrills

It was a night to remember as Villa Maria Estate picked up one of the highest accolades of the evening, the O-I New Zealand Reserve Wine of the Show Trophy, at the 28th Air New Zealand Wine Awards. The Villa Maria Single Vineyard Southern Clays Marlborough ... More>>

ALSO:

Future Brighter Money: RBNZ Releases New Bank Note Designs

New Zealand’s banknotes are getting brighter and better, with the Reserve Bank today unveiling more vibrant and secure banknote designs which will progressively enter circulation later next year. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news