New Zealand’s finance minister is one week out from the most important date in his professional calendar – delivering the next budget. And he could be in for a tough sell.
The image Grant Robertson carefully cultivates is of a disciplined spender and a fiscal policy nerd, joking that it’s “great to have a bit of public finance in the morning” and claiming that infrastructure deficits keep him up at night.
It is an image he needs to maintain in order to weather another unstable year and hold on to the votes Labour hoovered up from traditional rightwing voters in 2020. The budget – due to be delivered on Thursday – will be a key moment for setting the political scene as the country heads towards a 2023 election.
“This one is about security,” Robertson says of budget 2022. “It’s about providing New Zealanders with a secure future that is built off of that kind of low emissions, high wage economy.”
“Balance”, “reset” and “security” are words Robertson has used frequently in his budget announcements over the past few weeks as he seeks to reassure the public that the economy is in safe hands.
Less of a ‘crisis budget’
In the first pre-budget speech last week, Robertson provided a glimpse of what budget 2022 will entail: big spending on health and the environment, new commitments on borrowing limits and debt targets and a goal to look at long-term spending over short-term cash injections.
It is the fourth budget he has put together using the “wellbeing approach”, which includes a broader range of outcomes including health to assess policy success and which first grabbed international headlines in 2019.
Robertson admits Covid disrupted the wellbeing budgets of the past two years and they were not “quite how [he] envisioned them”, but now that this budget is “less of a crisis budget”, the government is returning to its original wellbeing framework, he says.
It is also third budget to be overshadowed by Covid. But unlike the past two years, where the government was buoyed up by its success in managing the pandemic, and extraordinary popularity, this year the shine is fading and its spending will be scrutinised more intensely as a result.
The opposition leader, Christopher Luxon, has regularly accused the government of being “addicted to spending” and alleged that it is driving up inflation. “We don’t need cuts to spending and public services but we do need to make sure that any wasteful spending or any incremental new spending, we’re getting a return from it,” he told RNZ last month.
With food prices at a record high, inflation at its highest in three decades, fuel prices topping $3 a litre and eye-watering housing costs, Labour has been paying for it in the polls. Robertson is “not surprised” with the shift in numbers.
“After having fought our way through Covid and sacrificed a lot, we’ve now got this global inflation shock. People are tired … and they’re a bit grumpy.”
While Jacindamania could perhaps now better be described as Jacinda-meh-nia, Robertson says Jacinda Ardern is still the best person for the job. “Jacinda is still really well respected in New Zealand. She’s a great leader and she’s somebody who I think has got the vision and the wherewithal to lead us.”
If there is a moment to steady the ship, it is now. For Robertson, that means investing significantly in the worn-out health system and pumping money into climate change solutions – big-ticket concerns he says he “owes to people”.
“If we don’t get on with the job of addressing climate-change issues, our children and our grandchildren will not forgive us for it, and they’d be right not to,” he says.
But this year’s budget may not provide the immediate relief many New Zealanders struggling with day-to-day costs are looking for.
Robertson is quick to reel off some of the responses the government has already made to the cost-of-living crisis, including increased winter energy payments, a reduction on fuel excise duties, halved public transport fares and benefit boosts. The crisis is “clearly putting significant pressure on households”, he says.
“I believe my job as the minister of finance is to deal with the here and now but also look ahead because it’s very hard for individual households to do that,” he says.
“We’re not going to lower fuel prices by cutting health spending.”
Facing a ‘global phenomenon’
The government is “in between a rock and a hard place for the first time in two years”, with both the Covid response falling away and the cost of living crisis ballooning, says Ben Thomas, a political commentator and former National government staffer.
“It is a bit of a global phenomenon and equally tricky for every government everywhere in the world.
“They [just brought] down petrol prices by 25 cents, and that reduction has basically been entirely eaten away since it was announced six weeks ago.”
The government is back in same position it was, but with more pressure to meet the public’s expectations for a response, Thomas says.
“You could probably get anybody to agree [the big ticket items] are important but they don’t do a lot in the short term to fix rising inflation and the rising cost of living.”
Still, finance ministers tend to under-promise and over-deliver on budget day, he says.
“Robertson – it should never be forgotten – was the architect of Helen Clark’s interest-free student loans policy, which was cobbled together at very short notice and pretty much won them the 2005 election.”
Despite some of the discontent indicated in the polls, he remains upbeat, saying: “We’ve got some of the best economic indicators, be it around debt or GDP or how quickly we’re getting back to surplus or unemployment ... It’s challenging and tough times – I’m not pretending it isn’t – but we’re in a better position than most to get through it.”
