Most of the intelligent criticism of Finance Minister Bill English’s sixth budget has been for what it doesn’t say.
This debate won’t be found in the media, which has focused on the reductionist Keynesian economics of ‘austerity’ versus ‘growth stimulus.’
This is how a lot of politicians want to see the issue, too, as it conveniently ignores the government’s long-term liabilities in favour of a winners and losers game.
Participants in the NBR-Grant Thornton post-budget debate preferred to tackle the longer play, with Westpac Chief Economist Domick Stephens saying that the fiscal time bomb (inexorably rising superannuation and healthcare commitments) has already exploded with the first of the post-war baby boomers now picking up their Super Gold Cards.
He described the government as “paralysed and fearful of change” in its failure to plan for the ageing population and associated extra heathcare costs.
Within a few years, the costs of National Super are forecast to be 51% of all social spending.
While generally supporting the budget’s strategy on reducing the deficit and its growth presumptions, Mr Stephens raised doubts about the boost for the economy and tax revenue from the expected Christchurch construction boom.
He doubted the country’s productivity levels would be sufficient to deliver what’s forecast, while saying the gains in GST and inflation staying low are also unlikely.
Summing up, he says all the threats to budget outcomes are external: “The spending is certain; the savings less so.”
Panellists John Banks and David Parker were surprisingly in agreement on issues such as the “fiscal time bomb” and any debt-driven stimulus.
They differed, of course, on taxation and a few other topics – but not enough to rebut Mr Banks’ contention that Mr Parker “would fit into any National caucus.” Possibly not something Mr Parker, as Labour’s finance spokesman, would like widely spread.
Nevil Gibson is Editor-in-Chief of the National Business Review based in Auckland. The above was a part of his weekly ‘Insight’ column.
