This Budget should worry Labour and friends

Dr Muriel Newman 

Budget Day has been described as an ‘exercise of democratic power.’

It is the day the Finance Minister begins the process of seeking Parliamentary approval for the government’s spending plans for the coming financial year – in this case, by tabling the Appropriation (2017/18 Estimates) Bill.

Budget documents provide an insight into the economic performance of the country.

They show we are doing well – a growing surplus, reducing debt, falling unemployment, and strong growth.

But while the economy expanded at 3.1%, it was less than the 3.6% expected, as exports, residential investment and business investment all grew at a slower pace than forecast.

Growth is expected to pick up again and peak at 3.8% in 2019, before tapering off to 2.9% in 2020 and 2.4% in 2021, as housing construction finally meets demand, net migration subsides, and rising interest rates begin to bite.

Increased spending

Government spending has increased by $5 billion in this Budget, taking core Crown expenses to $77.5 billion or 28.8% of GDP – lower than 29.2% of GDP in the last financial year. While government spending in future years is expected to increase, expenses as a proportion of GDP is forecast to decline to 27.5% by 2021.

This is consistent with the long term goal outlined by then Finance Minister Bill English in 2014 – to lower government spending to 25% of GDP, which empirical evidence shows is the optimal size of government to create a high performing economy.

Targeting Middle Class

National’s 2017 Budget firmly targets middle New Zealand through a $2 billion family incomes package that is expected to benefit around 1.3 million families by an average of $26 per week.

Through adjustments to the tax thresholds, most workers will receive up to $20 a week in tax cuts, as the bottom two tax rates are lifted from $14,000 to $22,000 for the 10.5% tax rate, and from $48,000 to $52,000 for the 17.5%. Other tax bands – 30% to $70,000 and 33% percent above $70,000 – are left unchanged.

Working for Families has also been adjusted with Family Tax Credits rising by over $9 a week for a first child under 16, and between $17 and $26 for other children – with payments abating earlier and more quickly for those moving into higher income brackets.

The Accommodation Supplement, which has not changed since 2007, has also been raised from $25 to $80 a week for most families, and in areas of high housing pressure, up to $145 more a week.

This package, which is expected to reduce hardship for some 50,000 children in low-income households, has been designed to enable ‘ordinary’ New Zealanders to share in the benefits of economic growth – with anyone who might be worse off having access to a $2 million transition fund.

Moving to Labour territory

Since these changes are not scheduled to come into effect until next April – and Labour Leader Andrew Little has not ruled out cancelling them if he becomes Prime Minister in September – the implied message is to vote for National if you want to ensure the changes become law.

In fact, by targeting welfare recipients in the 2015 Budget, with $800 million in benefit increases – the largest rise in 40 years – and now low to middle income working families in this Budget, National has moved right into Labour’s territory – emulating Helen Clark’s strategy in 2005, when she invaded National’s heartland by scrapping interest on student loans.
Frank Newman comment

This week’s NZCPR Guest Commentator, financial analyst Frank Newman, gives the budget the thumbs up and explains the politics:

“The National Government has produced a measured and politically clever Budget. Where this budget differs from its previous budgets is that it has opened its wallet and distributed the benefits of eight years of conservative management and the increased tax revenue derived from a very strong domestic economy in recent years.

“Those gains have been distributed widely, nearly everyone will benefit, but they are weighted particularly to low and middle income New Zealand. That has left National’s political competitors grasping for credible points of disagreement, and placed National firmly in the middle ground. It has effectively elbowed its opponents into isolated positions representing minority constituencies or special interest groups. National occupies Middle Earth and Labour is nowhere to be seen on that battlefield.”

You can read Frank’s informative outline of Budget measures HERE.

Setting priorities

In his Budget speech, Finance Minister Stephen Joyce explained that his first priority was to keep the economy growing. He identified as one of the main risks to growth, the inward-looking isolationist policies of some world leaders, and politicians here at home, outlining how trade protectionism, immigration cuts, foreign investment reductions, labour market restrictions, and higher taxes, would slow growth, reduce competitiveness, and cost jobs.

The Minister explained that the Budget’s Business Growth Agenda would increase trade, lift workforce skills, attract skilled migrants, boost innovation, and bring new investment into regional New Zealand.

Infrastructure boost

A major focus of the Budget is on building infrastructure to cope with our growing population. The $7 billion of new capital spending announced, takes the Government’s total commitment to new infrastructure to $32.5 billion over the next four years – 40% than the last four years.

Of that total, $9 billion is for new State Highways, $2.7 billion for new housing, almost $1 billion for the transport links through Kaikoura, $760 million to increase prison capacity, $570 million for defence, $450 million for more rolling stock for Kiwi Rail, and almost $400 million for building and upgrading schools.

The investment to sustain and expand public services is also significant – $7 billion over four years, with education set to receive $1.1 billion, law and order $1.2 billion, and $4 billion for health, taking the total Health Budget to a record $16.7 billion.

While district health boards are the main beneficiaries of the new spending, $60 million has been allocated to ambulance services to double crew all emergency call outs, $60 million to Pharmac for faster access to new medicines, and $1.54 billion for the pay equity settlement of care and support workers.

Ill-advised Marine Law

Of the specific appropriations in the Budget, Vote Treaty Negotiations is worthy of closer examination: It outlines the upfront cost to taxpayers of the new Maori claims gravy train created by National’s ill-advised Marine and Coastal Area Act.

This law, which gives customary title and protected customary rights to groups making claims for New Zealand’s coastline, could result in large areas of the coast being exploited by opportunistic claimants – including some who are demanding the right to harvest whales!
It is a disgrace, that at a time when the Treaty settlement process is finally coming to an end after years of conflict and dissension, National’s desire to appease the Maori Party has resulted in a brand new claims process that will stretch out for decades into the future, costing New Zealanders dearly.

Total spending for the Vote, which deals with Treaty of Waitangi claims as well as the new foreshore and seabed claims, is $50 million over the next financial year.

Of that, $8.45 million is earmarked for financial assistance to groups claiming customary interests in New Zealand’s coastline, with a further $33 million covering the administration of Marine and Coastal Area claims – and historical Treaty claims.

With budgeted expenses relating to Marine and Coastal Area Act claims now costing taxpayers in the region of $30 million dollars this year alone, let’s recap on what we know.
Firstly, to gain a customary marine title over an area, a Maori group must essentially prove that they “hold the specified area in accordance with tikanga” and “have exclusively used and occupied the area, without substantial interruption, either from 1840 to the present day or from the time of a customary transfer until the present day.”

Any claimants that succeeds in gaining title will have rights akin to ownership, including the right to veto all resource consents and conservation activities in the area, the ability to impose wahi tapu to restrict public access, the right to charge commercial operators, and ownership rights to all minerals – other than petroleum, gold, silver and uranium – including to all royalties from existing mining operations, back-dated to when their application was first lodged.

More claims

The architect of the law, the Minister of Treaty Negotiations Chris Finlayson, has now confirmed that around 580 claims were lodged by the April 3 cut-off date, using the two pathways specified in the Act – some 200 claims are with the High Court and 380 are for direct engagement with the Crown.

The Ministry of Justice website states that the law requires anyone applying for resource consents or permits in an area where an application has been lodged “to notify and seek the views of any group that has applied for recognition of customary marine title in the area”.
With claims covering the country’s entire coastline and Territorial Sea, all applicants within the marine and coastal area will need to consult with each of the parties that have lodged claims in their locality. Those claimants have the right to be consulted – and will no doubt seek a reward for doing so.

Of the $8.45 million of taxpayer funding available to help claimants prepare their claims, those involved in the direct Crown engagement pathway with simple claims, can apply for up to $162,000 in financial assistance, for claims of medium complexity $226,000, for complex claims, $318,500, and for highly complex claims $412,000.

Gross injustice

Those applying to the High Court can receive up to $156,750 in assistance for simple claims, $202,750 for medium claims, $260,250 for complex claims, and $316,750 for highly complex claims. That money of course, will largely end up in the pockets of the burgeoning Maori law fraternity.

In comparison, any member of the public, who wants to oppose opportunistic High Court customary rights applications, must pay $110 in fees for each ‘notice of appearance’ they register.

This is not only a gross inequality, but a gross injustice. Taxpayers are being forced to fund groups who want to exploit the coast for their own selfish ends, while those who want to oppose their spurious claims – in the public interest – are not only not eligible for any assistance at all, but they are being forced to pay!

Only one Marine and Coastal Area claim – CIV-2011-485-806 – has been resolved in the High Court to date. It was for an area to the south west of Stewart Island covering two Muttonbird Islands, and with only the Attorney General opposing the claim, the Judge found in favour of the applicant group.

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