$2,300,000,000: Dr Cullen’s finest hour

$2,300,000,000: Dr Cullen’s finest hour

First published on Spectator.co.nz…

By Paulo Politico

Dr Michael Cullen’s third budget, delivered last Thursday afternoon, represents a triumph for the government. After three years in office, the Labour Minister of Finance was able to report to the House that the operating surplus for the 2001/02 financial year is projected to be around $2.3 billion.

The size of the surplus is utterly breathtaking. But the fact that Dr Cullen was able to announce that the books are so rosy is nothing short of a miracle when one considers the economic backdrop behind this year’s budget.

Contrary to the spin of opposition MPs, the Clark-led government has faced some of the toughest economic conditions ever experienced by a modern administration. This time last year the country’s national airline, Air New Zealand faced collapse, as the value of the company literally evaporated.

At the same time the economies of some of New Zealand’s most important trading partners were slowing down. In the United States and in Australia, buoyant economies were flattening out and commentators warned of recession.

Then on 11 September last year, the terrorist attacks in the United States plunged the world into a state of uncertainty. Worldwide recession threatened as the war on terror commenced.

Against a backdrop of these incredible economic pressures, the New Zealand government, led by Helen Clark and Jim Anderton have continued to forge a style of leadership that has reassured voters. The country has a government of pragmatic leaders who closely represent the views and concerns of middle New Zealand.

But it is Cullen who has driven the government’s economic policy agenda. His tenure as finance minister has seen unemployment fall to a 13-year low, the current account deficit halve, interest rates decline, productivity increase, and economic growth continue. Under Cullen’s tenure, the boom in rural New Zealand has seen regions such as Southland, Taranaki, and the Waikato enjoy some of the best economic times in a generation.

The number of New Zealanders earning a higher income has increased significantly too. Labour fulfilled its pre-election promise to only increase the top marginal income tax rate for those income earners who earn over $60,000 a year. In 1999 only around five percent of all income earners enjoyed that kind of pay packet. Under Cullen’s tenure, that number has nearly doubled.

Cullen has now delivered three budgets. And with each budget has come a budget surplus. His third budget, delivered just months before the government seeks re-election for the first time, boasts one of the biggest surpluses in years.
It is simply not credible for the National Party to claim that Cullen is irresponsible with the country’s purse strings. In fact the government of Helen Clark, Jim Anderton and Michael Cullen is arguably the most fiscally responsible government in a generation. On top of the projected $2.3 billion in this budget, the operating surplus for the coming year is also expected to be well in excess of $2 billion.

Cullen has also been able to stay true to his promise to set money aside in the New Zealand Superannuation Fund (NZSF), to help offset the cost of future superannuation. The budget includes the allocation of $1.2 billion into the NZSF for that purpose.

Not only is Cullen delivering massive budget surpluses, he is also easily making the necessary payments into the NZSF. If the government wins re-election this year, the NZSF will have grown to almost $9 billion by the time it seeks a third term. Labour will be able to present older New Zealanders (who will increase in number) with a huge pot of money to help fund their retirement. And it will be Labour that can legitimately claim to have a plan - Michael Cullen’s plan - to fund superannuation.

National leader Bill English, one of the unlucky actors in New Zealand politics, blundered again on Budget Day when he forget an important ritual. One of the roles of the leader of the opposition is to move a motion of no confidence in the government following the finance minister’s budget speech. English forgot to move that motion.

But to be fair to English he was having a very bad day. After all the latest One News Colmar Brunton poll shows National (32) trailing Labour (51). His leadership inspires the confidence of only 12 percent of voters, compared to 50 percent of voters who prefer Helen Clark. But worse still for the embattled National leader is the fact that voter’s approval in the government’s performance has rocketed to 62 percent. That approval rating was registered before Cullen delivered a $2.3 billion budget surplus.

The opposition, outplayed by Cullen’s economic prudence, then tried to accuse the government by being stingy with the purse strings. But this argument too falls flat in light of the significant investment in social services.

The Clark-led government has increased superannuation three times, increased the minimum wage, introduced income related rents for state housing, initiated fee freezes and cheaper loans for tertiary students, pumped more money into hospitals and schools, and advanced other important social initiatives - such as investing in adult literacy and improving access to services for migrants and refugees.

Cullen’s third budget contains $400 million in new spending on tertiary education. Primary health care initiatives, where the emphasis is on preventative health measures, receives hundreds of millions of dollars. An allocation of $200 million is being invested for the development of the meningococcal vaccine strategy.

So it is unacceptable for the opposition to claim that money is not being invested in social services. Not only is the money being pumped into the provision of services, the government is also investing in important capital works programmes, such as major works on hospitals and schools.

Cullen concluded his speech last Thursday by stating that his third budget was not an election-buying budget. But he has grounds to justify the view that it may well be an election-winning one. Indeed.

How many other ministers of finance could have transferred $1.2 billion to help offset the cost of future superannuation, allocated around a billion dollars in new health and education spending, and still deliver a $2.3 billion budget surplus?

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