Budgets are not what they use to be and the Budget 2017 is no exception. Much of what Finance Minister, Hon Stephen Joyce, announced in the budget yesterday had been clearly signaled in pre-budget announcements. The increase in social investment, more money for the film industry, more spending on housing, millions to be spent on infrastructure (including Kaikoura), irrigation, schools, money dedicated to conservation and more funds for vulnerable children had all been announced prior to the budget and were simply reinforced in the context of the budget messaging. The new announcements also came as no surprise.
Increases in Working for Families and generally looking after families with lower incomes were clearly signaled before the election. The changes in tax thresholds which also impact on lower income earners were strongly hinted at prior to the budget announcements. The combination of the Working for Families increases and the changes in tax thresholds will cost the Government around $2 billion per year. That is additional money that will be circulating in our communities and that should be good for everyone.
This budget was all about spreading available funds around and pleasing as many people as possible in an election year budget. Minister Joyce is fortunate as he had the ability to do that with the economy in good shape, the Government projecting significant surpluses and the prognosis for our economy being quite bright. That is also the case here in Canterbury as a microcosm of New Zealand’s economy. We can expect things to stay, from a domestic perspective, strong and stable and there is every indication that we can enjoy continuing relatively strong economic growth.
We are a lucky province in what, in the international environment today, can be described as a lucky country.
However, you make your luck. The New Zealand economy is in good shape because of consistent economic policies, but also because of the determination of the business community to diversify, to add value, to innovate and to concentrate on export and tourism growth. With GDP growth expected to be over 3% for the next five years the Governments’ of the future have the ability to flex spending. We can all recall prior budgets where it was all about conserving cash and reducing expenditure. It appears that the Government’s target of reducing debt to 20% of GDP by 2020 is achievable. It also appears that the country is well positioned for unexpected economic downturns. So, all in all a positive unsurprising budget, taking into account current economic conditions and prospects.
However, New Zealand is not without its challenges. There is no doubt that our interest rate levels will have to trend up at some stage in the future and many of us are carrying high levels of debt, particularly with respect to our investment in housing stock. That poses a high risk to certain sectors of our economy. We constantly hear of short fallings in infrastructure, roading, rail, tourism amenities and rural broadband. In a rapidly growing environment those infrastructural shortcomings will be exacerbated. There will need to be a quantum shift in investment in diverse infrastructure in the future. We also face the risk of international volatility and uncertainty. We know that the world economies are doing OK, but we also know that there is a real risk of unexpected economic upheaval, and we live constantly with international uncertainty. This is exacerbated by the increasing tendency for other countries to adopt isolationist policies which will disadvantage New Zealand in an international forum.
So Budget 2017 has delivered some benefits to most of us. It has partially addressed the need to look after those with lower incomes across our economy and it has every indication of a relatively well performing economy across most sectors. We can be comfortable with that, but certainly not complacent.