In political terms this was a Shuffle Budget, says CTU economist Bill Rosenberg.
“Rather than redistribute to those who most needed it from those who could afford it, the Budget shuffled money from one group of not-so-well-off New Zealanders to another.”
Rather than address issues in a serious way, it shuffled policies just enough to recognise mounting public concern.
And there was distinct shiftiness in the way the Budget shuffled capital gains tax, housing and benefits policies from other parties in a way that was so minimal that even the Government wasn’t sure they would make a difference.
There is much the Government should be doing that has been shuffled under the carpet to be addressed by some future government.
It says we cannot afford to do much more but contradicts itself by dangling tax cuts for the next election year (2017). It is deliberately underspending by at least $500 million a year over the next two years so it can announce a tax cut of up to $1.5 billion in the 2017 Budget.
So, on its own figures it could find up to $1.5 billion for a major programme such as making a real difference to benefit levels, a step up in health or education, or paying state sector workers fair wages.
But if a Government really wants to address the growing pile of problems, it must raise more revenue.
Treasury described the risks still present in the international economy, with the probability greater that risks will worsen rather than lessen. Risks remain in the international financial system. Commodity prices including dairy may continue to fall. On the other hand, oil prices may start to rise again. But in all, exports of goods and services fall slightly as a proportion of the size of the economy and imports rise.
Domestically, the forecast is for continuing strong rises in house prices next year. High net immigration and other increases in labour supply are expected to keep annual growth in weekly earnings subdued throughout most of 2015 at around 2.1 percent” and slow the fall unemployment (which Treasury has persistently underestimated).
This does not paint a picture of an economy that is overcoming its imbalances or providing strongly rising wages. That includes extraordinarily low labour productivity growth. If labour productivity growth is the basis for wage growth (and that depends on better employment law) then the outlook for a high value, high wage economy in the medium term is not good.