Some have described the 2011 budget as cautious and safe. Cautious, yes. Safe – maybe politically, but not in terms of removing economic risks. And no one to my knowledge described it as strategic – constituting a coherent, medium-term plan for restoring balanced growth.
As with September’s earthquake and the Pike River disaster, the devastating effects of this week’s catastrophe are tempered by only one thing: the compassion, generosity and big-heartedness New Zealanders show to their fellow human beings when tragedy and hardship strike.
Calls are mounting for the next phase of the government’s emissions trading scheme, due to commence on 1 July 2010, to be deferred. There are strong arguments for a temporary suspension of the scheme.
The annual budget is the main statement of the government’s overall economic and social programme. So in the first instance it needs to be evaluated in terms of the government’s own goals. The next key issues are its spending – both the quantity and quality – its revenue position, and the difference between them – whether it is running surpluses or deficits.
From north America and western Europe to east Asia and Australia, politicians are raising doubts about the costs of reducing carbon emissions to combat climate change. But who would have thought that even in New Zealand, which likes to parade its environmental credentials, global warming is no longer cool?
Following the tax reforms of the 1980s, New Zealand ’s tax system was widely regarded as one of the least distortionary in the OECD. It remained largely that way through the 1990s (although under National the personal income tax scale was widened rather than flattened with cuts to lower rates not being accompanied by cuts to the top rate, contrary to the efforts of finance minister Bill Birch). The 2001 (McLeod) Tax Review found that the tax system was in good shape.
The National-led government which came into office seven months ago inherited a difficult economic situation.
The idea that the US financial crisis presages the end of capitalism – the dream of Marxists down the ages – doesn’t pass the laugh test. It took no time for local members of the anti-capitalist brigade to appear from under stones. Trade unionist Matt McCarten told us in the Herald on Sunday of 28 September that “free market capitalism doesn’t work and never has”. Presumably he thinks China ’s amazing success in lifting millions out of poverty over the last 30 years stems from rigid adherence to communist economic principles!
The current government has been unequivocal about its top priority goal: to get New Zealand back into the top half of the OECD income range. Prime minister Helen Clark reaffirmed that goal in parliament earlier this year. Finance minister Michael Cullen has said that the government needs to achieve 4% plus annual growth in real GDP on a sustained basis to achieve it.