Reaction to Budget relaxation shows balance 'about right'
By Pattrick Smellie
May 24 (BusinessDesk) - The government's decision to relax its Budget Responsibility Rules has attracted a balance of positive and negative criticism, suggesting it's pitched about right, said Prime Minister Jacinda Ardern in a speech to an Auckland business audience ahead of Finance Minister Grant Robertson's first "well-being Budget", next Thursday.
"For anyone who needs or wants a reminder, these were a set of self-imposed rules to demonstrate our commitment to sound economic management covering our debt-to-GDP ratio, core Crown spending and Budget surpluses," she said. "The reaction to (Robertson's) news that following the expiry of the Budget Responsibility Rules in 2022 we would be moving from a net debt target (of 20 percent) to a net debt range (of 15-to-25 percent) received positive and negative attention – usually a sign we have the balance right."
While critics on the left have said the rules should be abandoned earlier to allow more spending on both infrastructure and areas of ongoing spending need, those on the right have said it indicates the government is unable to maintain its commitments to fiscal discipline.
However, Ardern made clear the government still regards the rules as important to ensuring New Zealand has a buffer in the event of a global economic downturn or turmoil caused by, for example, the ongoing trade tensions between the US and China.
"Our economy is strong but, as you all know, we will always be impacted by global headwinds, which of course doesn’t mean we can’t prepare ourselves to be resilient and future proof but does tend to mean that we always keep one eye on the rest of the world," she said.
"The tariff war between the US and China has flared up again in the last couple of weeks, the US economy is also showing signs of slowing. And uncertainty in Europe due in large part to Brexit is ongoing adding further to the global economic headwinds we face.
"All of this adds up to a global environment in which New Zealand businesses operate that is both unstable and uncertain."
On progress towards policy-making that puts well-being measures on a par with economic resilience, Ardern urged patience, saying "systemic change does take time".
"My hope is though, that this year, by meeting both the Budget Responsibility Rules and with the new Well-being Budget, you’ll see us doing exactly what is needed – setting a strong foundation for both our country and our people."