2012 budget: Old news

by Listener Archive / 02 June, 2012
With this Budget, forewarned is forebored.

Budgets have never been a barrel of laughs – just a formalised way of worrying about the lack of money before, as well as after, we nevertheless spend it. And despite our unprecedentedly grim fiscal portents, this week’s so-called “zero” Budget wasn’t even in the great canon of Black Budgets that have smote citizens in bygone eras. It was simply grey. Modest sums of money were squished around to a few different locations within the depleted beanbag that is the state’s coffers. And, as is now traditional, all was pre-announced weeks in advance, so the day itself was just another platitude-fest in Parliament.

As austerity fiscal management goes, this is hardly likely to inspire a modern version of The Sugarbag Years. What it does underline is that our politicians, like those of most other affl icted countries, are fresh out of bright ideas. Cutting spending and reining in debt is about as far as the thinking goes. Here, as in Europe, the focus on alternative solutions to the scrimp-and-save approach is intensifying. But with only France and Greece leading the way in the anti-austerity stakes, we may wait a long time for the other shoe to drop. So far, it’s hard to resist the conclusion that the new leaders of France and Greece don’t have any cunning plans – they’ve simply been elected because French and Greek voters are shamelessly spoilt.

Most New Zealanders reflexively feel at least a little sheepish about the extent to which their lifestyles are founded on debt and that, in a wider sense, their expectations as citizens have been met by unsustainable levels of borrowing on their behalf. At worst we’re a bit Micawberish: something will turn up. In Gallic and Hellenic terms, however, the concept of meeting one’s obligations has morphed into: “Something had better bloody well turn up, because we’re Entitled.” You can’t fault their insouciance. If they default, it really is someone else’s problem – perhaps even more than it is theirs. What can bilked lenders do? They can’t send bailiffs in to take bits of Greece and France away. But the knock-on effect through the Eurozone, and to the wider global economy, is knee-jellying.

As Europe’s leaders frantically try to work through these uncharted scenarios, our Government has been shuffling a few extra million here, and paring back another few there, hoping that with John Key’s sunny smile pasted on the front of it, this Budget will carry us through to another set of slightly less dismaying growth indices, and re-election in 2014. But as the Opposition repeatedly insists – sadly without producing any evidence so far – there may well be better routes out of the mire than this paltering austerity shtick. Labour’s three front-bench Davids have been critiquing National’s policies, which suggests a corollary of much cleverer, growth-rocketing strategy to come. What this is we can only guess. David Shearer got as far as Finland at one point, but since then his Nokia has been on “Call waiting”. Labour and the Greens have legitimate concerns that too much winding back of government spending is contractionary, and causes pain to the vulnerable without concomitant benefits to growth and job creation. It can also crimp business vitality.

Europe, however, where the antiausterity movement is gaining momentum, as yet offers us few clues – other than that austerity may in the the super-rich could be hit with an unavoidable tax like this, the resultant revenue would go a long way towards addressing the country’s fiscal problems. In contrast, Britain has found its top income tax rate of 50% is adding nothing much to revenue growth. Fairness is undeniably the new global buzzword around tax, and anything to draw the very rich – private and corporate – into paying a greater proportion would be both fiscally useful and wildly popular. National has already put a foot down this path with its tightening of property tax breaks, and Labour last election made the useful contribution of putting capital gains tax on the mainstream agenda. There’s plenty more scope here, yet so far it’s been Hone Harawira – our Parliament’s Mister No-Mates – who has been the most vocal supporter of a financial transactions tax.

The only other clearly articulated Hollande proposal is to borrow more – in France’s case from outside the European community while saying a big fat Gallic “Boff!” to Germany and the other Euro blackboard monitors. You can only wish it bonne chance with that. For New Zealand, however, the rather obvious barriers to the bigger borrowing method are the willingness of someone, somewhere to lend us more money, and our degree of fear about our ability to repay it without beggaring ourselves further. Labour’s policy prescriptions are under general redesign, but on all its utterances so far, more borrowing is implicit. It was almost explicit in frontbencher David Cunliffe’s “personal” state of the nation speech last month as he portended that National’s austerity responses were doomed to fail. But while remaining delightfully vague about its borrow-to-grow thinking, Labour has at least put other formerly taboo subjects on the agenda.

In addition to capital gains tax, Shearer has endorsed the suspension of payments to the Cullen fund, and has positively nailed the age of superannuation entitlement to the whiteboard, saying we need to consider raising it. Key unwisely spooked himself into vowing never to go near Super, hypersensitive to the downstream consequences of National’s broken Super promises of the 90s – Winston Peters not the least of them. He needs to get over this. Two decades on, nobody is in any doubt about the pension system’s anachronisms. In any case, we might not have much time to think outside the austerity chic square. The electoral trends in Europe are surgingly opposed to stringencies, suggesting that most governments playing the orthodox fiscal game are headed for the chop. In past decades, citizens told that the world was in recession stayed told. They saved rubber bands and silver paper, turned collars and ate lentils. Today’s voters, it appears, simply choose not to accept the need for stringency. They will not be doing ingenious things with flour sacks to make ends meet but, rather, insisting that politicians do ingenious things with central banking systems. And mirrors if necessary.
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