Nobody anticipated the scale of extra spending in this year’s budget, but CTU economist Craig Renney asks where is the vision for building back better?
Budget 2021 brought the welcome surprise of an additional $3.3 billion of welfare spending to lift benefit rates by $32-55 per week.
The extension of the training incentive allowance, and an additional $914m to DHBs is also welcome.
Other sleeper hits included a $3b commitment to recycle future Emission Trading Scheme revenue, and the extension of Warmer Kiwi Homes to provide insulation for 47,700 more houses.
Home support receives $88.1m in new funding for paid travel and break time over 4 years, making a big difference for a low paid workforce.
But with the economy faring better than expected during the Covid crisis, there was an opportunity to do more in this budget.
Contrary to last year’s dire predictions, the economy is in the 'Goldilocks Zone’. GDP is due to peak at 4.4% in 2023, unemployment due to fall to 4.2%, and inflation and interest rates are low.
Covid didn’t deliver the giant deficit or unemployment that was expected, which meant the Crown borrowed much less than anticipated, and had plenty of headroom to take on more debt without breaching the debt figure it was elected on last year.
With net core Crown debt below 40% of GDP on some measures, stratospherically lower than Australia, the US and other countries we compare ourselves to, our Finance Minister has chosen to be very prudent with his expenditure.
WHAT THE BUDGET DIDN’T DELIVER
The budget failed to provide the basics in a few key areas. In health we needed $1.4b just to cover basic cost pressures. We think its short by hundreds of millions, almost guaranteeing DHBs will run deficits again next year, as waiting lists grow and wage increases are needed for health care workers.
In Early Childhood Education the Government announced $170m toward pay parity, and yet funding for services did not increase enough to meet the cost of inflation.
The Budget also showed the Government is set to miss its targets on child poverty. Welfare payment increases are predicted to lift another 33,000 children out of poverty. But on one measure, 190,000 children will still be in poverty by 2023.
Vote Justice received just a 1% increase for all items not related to legal aid. Given that its Hōkai Rangi Corrections strategy is supposed to take a wellbeing approach, is the Government willing to fund this or will it just continue with old-style custodial services?
A REAL OPPORTUNITY
Freed from the shackles of coalition, the Government had the opportunity to make important symbolic change with this budget.
And there was so much to like, welfare spending is welcome, the decision not to just pay down debt is fantastic.
But Budget 2021 didn’t articulate a clear plan for the economy, or a vision of the kind of country we want to be 10 years from now.
There is no shortage of things we could usefully be spending money on. In public transport, housing, infrastructure, we could be spending more to deliver on our aspirations.
We need a plan on how we can deliver public services and the sort of economy we want to see.
The CTU would really like to have that conversation with the Government.