There always will be many perspectives and opinions on national budgets, just as there will always be winners and losers. No finance minister in any democracy can ever dream of universal approval, no matter how he or she tries to justify the budget proposals presented.
Finance Minister Bill English’s third and perhaps most difficult budget has been delivered in one of the worst economic situations New Zealand has ever faced. The debt has been at record levels, right up there with the likes of the PIIGS economies that is beginning to impact the very raison d’etre of European Union’s single economy.
A policy of largesse practiced by successive Labour governments over nine years has caused the debt to balloon to enormous proportions because of runaway increases in welfare payments, which kept on inventing new schemes to pander to the electorate.
This policy also led to a bloated bureaucracy in Wellington, with salary increases that outpaced that of the private sector workforce. It also led to the creation of dozens of government funded programmes that were expensive and delivered little benefit by way of value to the economy of the wellbeing of the people.
Add to that the huge interest free student loans costing the exchequer billions of dollars, with little recourse for collection of the debt and scarcely an incentive for the borrowers – many of who left the country after finishing their education – to pay back the interest free loans.
There are no free lunches – it is a universal law. Any impression of a free lunch or a free ride has to come up with a large bill and pain at some stage, when corrections need to be made for the very survival of the economy. This is such a time. It is indeed payback time for the lax policies of doling out largesse of much of the past decade.
The unsustainably bloated welfare programme had to be addressed sooner rather than later. Though this should have been done in the first year since to coming to power, the National government put it off until its third year, when it had no options but to wield the scissors.
Better late than never, nonetheless. This will certainly raise the hackles of those availing of the benefit system, particularly if they are higher income earners. The Tax Working Group’s findings last year were shocking and had some of these measures not been measured in Budget 2011, the country would well have been on the road to financial ruin.
After the bold budget last year, which focused on growth, the government’s financial plans were hit severely by the unfortunate Canterbury earthquakes, forcing it to make whatever course corrections necessary this year. And it has shown that it has guts, especially given that this is an election year.
This is the first budget that has slashed government spending in 80 years. This could be either as much a sign of courage as desperation. We like to think it is the former because the reasoning behind it seems sound.
The budget has got its priorities right. At the risk of courting unpopularity, given that 100,000 families are going to be affected by the changes to Working for Families and the discomfort of both employers and high earners for their larger KiwiSaver payouts as well as tertiary students more stringent loan terms, the government has chosen to soldier on.
Bringing back the books on balance in 2015, a year earlier than expected, is a great goal to pursue given the circumstances. And enduring a little pain after all those government sponsored good times of the past decade is not too much to ask.